You earn more than you did two years ago. Your deposit is bigger. Your credit file is clean. And the number the calculator gives you is smaller than it was.
This confuses a lot of people, and the explanation is one line: lenders do not assess you at the rate you are offered. They assess you at roughly 3 percentage points above it.
The buffer is doing almost all of the work
APRA guidance has lenders stress test borrowers at around 3 percentage points above the product rate. Apply at 6 percent and the lender checks whether you could still make the repayments at about 9 percent.
The buffer is a percentage, not a fixed amount, so when rates rise, the assessment rate rises with them, and the gap in dollar terms widens. Every increase in the actual rate lands on your assessed repayment amplified.
That is why a pay rise of a few percent does not offset a rate rise of one percent. The rate rise is being applied to your entire loan balance. The pay rise is being applied to your income, then reduced by tax, then compared against a stress-tested repayment.
The arithmetic is stacked against you and there is nothing unusual about your situation.
The other things that changed while you were not looking
Living expense benchmarks moved. Lenders apply the Household Expenditure Measure as a floor. Declare less than the benchmark and they use the benchmark anyway. As the cost of living rose, so did HEM, which reduced everyone's assessed surplus regardless of how carefully they budget.
Your credit card limits did not shrink. Lenders assess the full approved limit, not what you owe. A $30,000 limit you never touch is commonly treated as around $900 a month in commitments. Two cards and an old store card can quietly remove six figures from your capacity.
Buy now pay later became a commitment. Facilities that were once invisible to a lender are now assessed as ongoing obligations at most lenders.
Dependants cost more. Each child adds several hundred dollars a month to assumed expenses, and those assumptions rose too.
The number varies enormously between lenders
This is the part worth acting on, because it is the one thing you control.
Across the ten lenders NIK Finance models in full policy detail, the inputs differ sharply:
- Serviceability buffers range from 1.5 to 2 percent at Bluestone, the lowest on our panel, to a standard 3 percent at most of the majors
- Debt-to-income caps range from under 6x for investment lending at Qudos, up to 8x at Macquarie, and no hard cap at Firstmac or Bluestone
- Rental income shading, if you are an investor, ranges from 75 percent at HSBC and Macquarie to 90 percent at the majors
- Floor rates apply at some lenders regardless of your actual rate, such as 7.25 percent at Qudos
Put together, the same applicant with the same documents can see a difference of well over $100,000 between the most and least generous assessment. Not because one lender likes you more, but because the formulas genuinely differ.
Most borrowers get one number, from their own bank, and treat it as the answer. It is one answer out of many.
Four things that move your number, ranked by speed
1. Cut credit card limits. Days, not months. Ring your bank and reduce the limit, or close cards you do not use. This is free, fast, and reverses immediately in your assessment. It is the highest return action available to almost everyone reading this.
2. Clear a small loan. Weeks. Paying out a $12,000 car loan removes the full monthly commitment from your assessment. For serviceability purposes, clearing a small debt often does more than adding the same amount to your deposit, because it changes your assessed monthly position rather than just your LVR.
3. Fix what is on your credit file. Weeks to months. Errors are more common than people assume. A paid default still listed as unpaid, or a duplicate enquiry, is worth disputing. So is the habit of applying to multiple lenders, which leaves a trail that makes each subsequent application harder.
4. Change lenders, not circumstances. Immediate. If your position is genuinely fine and the assessment is the problem, the answer may simply be a different lender. This costs you nothing except the effort of finding out which ones fit.
What does not work
Understating your expenses. Lenders verify against your bank statements and apply HEM as a floor. It wastes everyone's time and damages your credibility on the file.
Applying everywhere to see who says yes. Every application leaves a hard enquiry. A cluster of them reads as a borrower who has been shopping and failing, and it makes the next lender more cautious, not less.
Waiting for rates to fall. They may, and prices may move too. Deciding based on a forecast you cannot control is not a plan.
Work out your real number before you go looking
The borrowing power calculator gives you an estimate on average lender assumptions, which is a reasonable starting point.
The more useful question is which lender assesses you most favourably, because that is where the six-figure difference lives. Your Kreddi Score maps your position against real lender policy, including buffers, DTI caps and shading, and shows which lenders will lend you the most before you apply anywhere. Fifteen minutes, no credit impact.
Finding out you can borrow more than your bank told you is common. So is finding out you cannot, which is worth knowing before you start attending inspections.
Frequently Asked Questions
Why has my borrowing power decreased even though my income increased? Because lenders assess your repayments at a rate around 3 percentage points above the actual rate. When rates rise, that assessment rate rises with them, so the same income services a smaller loan. A modest pay rise rarely offsets the effect of a full percentage point of rate movement.
What is the serviceability buffer in Australia? A stress test applied by lenders, guided by APRA, of around 3 percentage points above the product rate. If you apply at 6 percent, the lender checks you could still repay at roughly 9 percent. It is the single largest factor determining how much you can borrow.
How much do credit cards reduce borrowing power? More than most people expect, because lenders assess the full approved limit rather than your balance. A $30,000 limit is commonly treated as around $900 a month in commitments, which can reduce borrowing capacity by well over $100,000 depending on the lender.
Can I do anything to increase my borrowing power quickly? Yes. Reducing or closing unused credit card limits works within weeks and costs nothing. Paying out a small personal or car loan removes that commitment entirely. Both change your assessed position faster than waiting for a pay rise.
Do all lenders calculate borrowing power the same way? No, and the differences are large. Buffers range from around 1.5 percent to 3 percent across lenders, debt-to-income caps range from 6x to no hard cap, and rental income is shaded anywhere from 75 to 90 percent. The same applicant can see six figures of difference between lenders.
Get Your Real Borrowing Number
One lender's assessment is one lender's opinion. The spread across a panel of 130+ lenders on the same income and the same debts is wide enough to change what you can buy.
Model it yourself with the borrowing power calculator, then get your Kreddi Score to see which lenders would actually approve that number. Free, about 15 minutes, no credit impact.
Serviceability settings reflect the lender policies modelled in the NIK Finance scoring engine and change without notice. This is general information, not personal advice, and does not consider your circumstances. NIK Finance Pty Ltd is a Credit Representative (567387) of Finsure Finance & Insurance Pty Ltd, Australian Credit Licence 384704.