On 28 May 2026 the Australian Prudential Regulation Authority announced it was keeping its macroprudential settings unchanged. In its words, "the mortgage serviceability buffer will remain at 3 percentage points". The countercyclical capital buffer stays at 1 per cent of banks' risk-weighted assets, and the limits on high debt-to-income lending are unchanged. APRA has made no change to any of these settings since, and it has not run a public consultation on the buffer this year.
What APRA said
APRA described the environment as highly uncertain. It pointed to higher interest rates as inflation stayed elevated, cost pressures from the conflict in the Middle East and higher oil prices, and weaker consumer and business confidence. It said households remain highly indebted, but arrears and non-performing loans are low and the banking system is well capitalised. High debt-to-income lending was running well below the limit, so the limit was not restricting bank lending, but APRA said it was prudent to keep it as a guardrail. Chair John Lonsdale said the settings remain appropriate for now, that the risk landscape is volatile and could evolve rapidly, and that APRA will adjust its settings if needed. Since then the Reserve Bank has lifted the cash rate again, to 4.60 per cent on 29 September.
How the buffer works
When you apply for a home loan, the lender does not test whether you can afford the rate you will pay. It adds at least 3 percentage points and tests whether you could still make the repayments at that higher rate. APRA says the buffer helps ensure recent borrowers can keep servicing their loans if rates rise or their circumstances change. It has been 3 points since October 2021, when APRA raised it from 2.5. At a typical variable rate of about 6.5 per cent after the September rise, lenders are testing new borrowers at about 9.5 per cent, and some lenders add their own floor on top.
Since 1 February 2026 there is a second limit. APRA activated a cap on high debt-to-income lending: no more than 20 per cent of a bank's new owner-occupier loans, and separately 20 per cent of its new investor loans, can go to borrowers whose total debt is six or more times their income. Bridging loans for owner-occupiers and loans to buy or build a new dwelling are exempt, and the limit applies to banks and other deposit-takers, not to non-bank lenders.
What the buffer costs your borrowing power
Here is the arithmetic, holding everything else equal. Say a lender works out you can afford $6,000 a month in repayments after your living costs. At a 9.5 per cent assessment rate over 30 years, that supports a loan of about $714,000. If the buffer were 2.5 points, the 2021 setting, the same $6,000 would support about $746,000, roughly 4.5 per cent more. At a 2 point buffer it would be about $780,000. Each half point of buffer is worth about 4 to 5 per cent of the most you can borrow.
For a lot of files, though, the buffer is not the thing holding the number down. Living expense benchmarks, credit card limits you never use, HECS repayments and other debts usually cost more borrowing power than half a point of buffer would add back, and those you can do something about.
The buffer is not really testing whether you can pay 9.5 per cent. It is testing whether you could still pay if rates kept rising, which is exactly what they did.
The refinance exception that does exist
There is one real flexibility. In June 2023 APRA wrote to banks confirming that its rules allow exceptions to lending policy, including the buffer, as long as they are prudent and limited. For a borrower refinancing with another lender, APRA said a bank can look at evidence beyond the standard test, such as the borrower's past repayment record, and assess the loan case by case. Several banks changed their exception processes to assess like-for-like refinancers with a good repayment history against a smaller buffer. Lenders rarely advertise it and not every lender does it, so if you are stuck on a high rate because you fail the full test, ask a broker which lenders on their panel will assess your refinance this way.
What to do
- Plan on the 3 point buffer staying. APRA has given no sign of loosening it, and with rates rising it is more likely to hold or tighten than ease.
- If your borrowing power falls short, fix what you control first: close unused credit cards, clear small debts and get your declared expenses accurate.
- If you are refinancing and fail the full test, ask about lenders that assess like-for-like refinances as an exception, using your repayment record.
- If you are buying, get your pre-approval rechecked at the new assessment rate after the September rise.
Disclosure: Licensed brokers who meet our criteria pay Your Finance Guide a partnership fee to receive enquiries from this site. The fee is paid by the broker, not by you, and is not added to your loan. Brokers are usually also paid a commission by the lender when a loan settles. The borrowing power examples are illustrative arithmetic, not a lender's assessment.