How much can I borrow for a home loan in Australia in 2026?

How much you can borrow for a home loan in Australia in 2026 is substantially less than you might expect: with the RBA cash rate at 4.10% as of 18 March 2026 and variable rates from the major banks starting around 5.49%, most lenders test your repayment capacity at 8.49% or higher under APRA's mandatory 3% serviceability buffer. That buffer alone can reduce your maximum borrowing capacity by $80,000 to $120,000 on a $120,000 income compared to being assessed at the contract rate.

Most Australians estimate their borrowing power based on the rate they see advertised, and then feel blindsided when the bank offers significantly less. The gap is not accidental - it is the product of specific regulatory rules, lending policies, and the way lenders count your debts. This post explains exactly how lenders calculate how much you can borrow, walks through a real worked example, and shows you six practical steps to increase your borrowing capacity before you apply.

How the APRA 3% serviceability buffer reduces your borrowing power

The Australian Prudential Regulation Authority (APRA) increased the mortgage serviceability buffer from 2.5% to 3% in October 2021, and has confirmed it will remain at 3% following its July 2025 review. The rule requires every authorised deposit-taking institution (ADI) - that means every bank, credit union, and building society - to assess your ability to repay at your contract rate plus 3 percentage points. If the advertised rate is 6.25%, your application is stress-tested at 9.25%.

The practical impact is significant. On a $700,000 loan over 30 years at 6.25%, the actual monthly repayment is approximately $4,311. Assessed at 9.25%, the monthly figure the bank uses is approximately $5,762 - a difference of $1,451 per month. The lender uses that higher figure, not the real one, to decide whether you can afford the loan.

The buffer is not the only constraint. APRA also introduced a formal debt-to-income (DTI) cap from 1 February 2026, restricting banks from issuing more than 20% of new mortgages to borrowers with a total debt-to-income ratio above 6x. A household earning $200,000 combined would therefore face informal pressure to keep total debt below $1,200,000, even if their expenses technically allowed a larger figure. (Source: APRA announcement, February 2026)

TOOL: Borrowing Power Calculator

See your estimated maximum borrowing capacity based on your income, expenses, and existing debts using the same APRA serviceability methodology Australian lenders apply.

Link: https://propmarkethub.com.au/borrowing-power-calculator

What can you actually borrow in 2026: a worked example

Take a couple earning a combined gross income of $200,000 per year with no dependants and no existing debts. At a contract rate of 6.25% (variable), the lender assesses repayments at 9.25%. Using a 30-year term, they can service a maximum monthly repayment of roughly $5,100 after living expenses are accounted for under the Household Expenditure Measure (HEM). Working backwards, that monthly repayment at 9.25% supports a loan of approximately $620,000 to $650,000 - well below a naive expectation of six times income, or $1,200,000.

Now add a $30,000 HECS-HELP debt for one partner. Most major lenders count HECS-HELP repayments as a liability, with the ATO collecting a mandatory repayment of roughly 4.5% to 8.5% of income depending on earnings. On a $100,000 salary, that is approximately $4,500 to $8,500 per year in compulsory repayments - money the lender subtracts from your available income. That single HECS-HELP debt can reduce borrowing capacity by $40,000 to $50,000 at a major bank.

The table below shows approximate borrowing estimates for different household profiles at current rates. These are indicative only; actual figures vary significantly by lender and individual expenses.

Household profile

Gross income

No debts (approx.)

With HECS $50k (approx.)

Single income

$80,000

$380k - $440k

$330k - $390k

Single income

$120,000

$580k - $650k

$530k - $600k

Dual income

$150,000

$700k - $800k

$640k - $740k

Dual income

$200,000

$920k - $1,050k

$860k - $980k

Source: PropMarketHub estimates based on APRA serviceability methodology, variable rate ~6.25%, 30-year P&I, April 2026. For illustrative purposes only.

Six common reasons your borrowing power is lower than expected

Understanding what lenders look at is the fastest way to close the gap between what you expect to borrow and what they will actually lend.

1.    HECS-HELP debt. Counted as a compulsory liability at your current repayment rate, regardless of how much you have left. A $50,000 HECS balance on a $100,000 salary typically reduces borrowing capacity by $40,000 to $50,000.

2.    Credit card limits. Lenders count 3% of your total credit card limit as a monthly liability - regardless of your actual balance. A $20,000 limit costs you $600 per month in the bank's assessment, reducing borrowing capacity by approximately $70,000 to $80,000.

3.    Existing personal loans. Counted at the full actual repayment. A $15,000 car loan at $350 per month reduces borrowing capacity by roughly $40,000 to $50,000.

4.    Dependants. Each dependant child increases the HEM benchmark the lender applies to your expenses. A couple with two children will have $10,000 to $15,000 more in assessed annual expenses than a couple with none, reducing borrowing capacity by $100,000 or more.

5.    Self-employment income. Lenders typically average your last two years of tax returns and shade the result. Volatile income, recent business losses, or a short trading history can see your assessed income fall well below your actual earnings.

6.    Recent missed payments or credit enquiries. Multiple credit applications within a short period signal financial stress. A 90-day default on a phone bill from three years ago can still affect assessment at some lenders.

Watch Out For:

Credit card limits reduce your borrowing power even if you pay the card off in full every month and carry no balance. A $25,000 limit across two cards costs you $750 per month in a lender's serviceability model - equivalent to losing roughly $90,000 in borrowing capacity. Cancel unused cards before applying, and ask your bank to reduce the limit on cards you keep.

What is HEM and why it often overrides what you declare

The Household Expenditure Measure (HEM) is a benchmark published by the Melbourne Institute that lenders use as a minimum living expense figure. Even if you declare lower actual expenses, most lenders assess your repayment capacity against whichever is higher: your declared expenses or the HEM figure for your household type and postcode.

HEM figures vary by household composition and location. A single person in Melbourne is assigned different minimum expenses than a family of four in regional Queensland. This protects the financial system from borrowers who understate their costs, but it also means that low-spending households often cannot access the full borrowing capacity their income would otherwise suggest. You cannot 'beat' the HEM by declaring lower expenses - the lender simply uses the higher number.

If your declared expenses genuinely exceed the HEM benchmark, lenders use the higher declared figure, which further reduces your borrowing capacity. This is why a high earner with a large discretionary lifestyle, subscriptions, and a private school bill can sometimes borrow less than a moderate earner with lean expenses.

Five practical ways to increase how much you can borrow

You have more control over your borrowing capacity than most people realise. These five steps, taken in the weeks or months before applying, can meaningfully increase the figure a lender offers.

7.    Cancel unused credit cards. This is the single fastest improvement. A $15,000 card you never use is still counted at $450 per month in assessed liabilities.

8.    Pay down or consolidate personal loans. A lower outstanding balance means a lower assessed monthly repayment. If you have multiple small loans, consolidating into one with a longer term reduces the monthly figure the lender counts.

9.    Apply after a pay rise or bonus. Lenders use your current salary. If you are expecting a pay rise in the next three months, delay the application until it is reflected in two or three payslips.

10. Choose a longer loan term. A 30-year term produces a lower required monthly repayment at the assessment rate than a 25-year term, increasing the maximum principal. You can always make extra repayments to pay it off faster.

11. Compare lenders. Borrowing power estimates can vary by 20% to 40% across lenders for the same borrower, due to different HEM benchmarks, income shading policies, and credit policies. A mortgage broker can identify the lender whose model best suits your profile.

Once you know your borrowing capacity, use the Mortgage Repayment Calculator to check what your actual monthly repayments would look like at different loan amounts and rates, so you can sense-check the figure before you commit.

TOOL: Mortgage Repayment Calculator

Check your estimated monthly repayments at any loan amount and interest rate so you can set a realistic purchase budget before you apply.

Link: https://propmarkethub.com.au/mortgage-calculator

Why the rate you see is rarely the rate you pay

A lower interest rate directly increases how much you can borrow, because the lower monthly repayment at the assessment rate frees up more capacity. On a $700,000 loan, the difference between a rate of 5.49% and 6.49% - assessed at 8.49% versus 9.49% - can shift your qualifying loan amount by $60,000 to $80,000.

Advertised rates are also not always the rate you receive. Lenders price based on your loan-to-value ratio (LVR), loan purpose, and loan size. An LVR below 70% typically attracts the sharpest rates; above 80%, you will generally pay a higher rate and may trigger lenders mortgage insurance (LMI). As of 1 April 2026, the lowest variable rate available from a big four bank was 5.49% (Westpac Special Online Refinance, LVR 70% or less). (Source: money.com.au, April 2026)

Use the Loan Comparison Calculator to run a side-by-side comparison of different rates and loan structures. The difference in total interest paid over a 30-year loan between 5.49% and 6.49% on $700,000 is approximately $145,000 - nearly as large as a deposit.

TOOL: Borrowing Power Calculator

Enter your income, existing debts, and estimated expenses to get a personalised estimate of your borrowing capacity using the APRA methodology Australian lenders apply.

Link: https://propmarkethub.com.au/borrowing-power-calculator

The Bottom Line:

How much you can borrow for a home loan in Australia in 2026 depends on your gross income minus your assessed expenses, existing debts, and the APRA 3% serviceability buffer applied on top of your contract rate. With variable rates around 5.49% to 6.50% at the big four banks, most borrowers are assessed at 8.49% to 9.50% or higher. Before you start searching for property, run your numbers, cancel unused credit cards, and compare lenders - borrowing power can vary by 20% to 40% between banks for the same borrower.

Knowing your borrowing capacity before you start inspecting properties puts you in a far stronger negotiating position and avoids the disappointment of falling in love with a home the bank won't fund. Run your numbers with the Borrowing Power Calculator, then check your estimated repayments with the Mortgage Repayment Calculator to build a realistic budget. This article is for informational purposes only and does not constitute financial advice.