The serviceability buffer is the extra interest rate a lender adds when it checks whether you can afford a home loan. APRA requires banks to test new borrowers at least 3 percentage points above the loan’s actual rate. So on a 6% loan, your repayments are assessed at 9%, which is why the bank’s borrowing figure is lower than most online calculators.

The serviceability buffer at a glance
Point Detail
Size At least 3 percentage points above the product rate
Set by APRA, in its prudential standard APS 220
Applies to Banks and other authorised deposit-taking institutions
History Raised from 2.5 to 3 points in October 2021; kept at 3 on 28 May 2026
Effect Each $100 a month of repayment capacity supports about a quarter less loan

Why does the buffer exist?

To check that you could still pay if rates rose. A home loan runs for decades, and the rate on day one is unlikely to be the rate in year five. APRA, the regulator of banks, sets the minimum buffer so that borrowers are not approved for a loan they could only afford at today’s rate. APRA reviewed the setting in 2026 and kept it at 3 percentage points.

How much does the buffer reduce borrowing power?

Quite a lot. Each $100 a month you can put towards repayments supports about $16,680 of loan at 6% over 30 years, but only about $12,430 at the 9% assessment rate. That is roughly 25% less.

What the same monthly surplus supports
Monthly amount for repayments Loan at 6% Loan assessed at 9%
$100 About $16,680 About $12,430
$4,000 About $667,000 About $497,000

This is why a repayment calculator can suggest you can afford far more than a lender will approve. The borrowing power calculator on this site tests at the buffered rate, so its figure is closer to what a lender works out.

Do all lenders use a 3% buffer?

  • Banks and other deposit-taking lenders must use at least 3 percentage points under APS 220.
  • Non-bank lenders are not covered by APRA’s standard, but they still have to meet responsible lending rules and set their own assessment rates.
  • Floor rates. Some lenders also apply a minimum assessment rate, and use whichever is higher.

The result is that the same income and expenses can produce different borrowing figures at different lenders, which the borrowing power assessment explains in more detail.

Are there exceptions to the buffer?

Limited ones. APRA allows banks to make exceptions to their lending standards if they are managed prudently and kept small. Some lenders use this for refinancing borrowers who are moving to a loan with lower repayments and have a good repayment history. It is lender policy, not a right, and it is worth asking about if your current loan is costing more than a new one would. The guide to refinancing covers when a switch makes sense.

Does the buffer apply to my other debts?

Lenders assess your existing home loans and other commitments too, often at a buffered or set rate rather than what you actually pay. Credit cards are usually assessed on their limit, not the balance. That is why closing unused cards and paying down debts before you apply can lift borrowing power, as the guide on how to increase borrowing power explains.

How does the buffer combine with living costs?

The lender subtracts your living costs and debt repayments from your income, then checks the surplus covers repayments at the buffered rate. Living costs are usually the higher of what you declare and a benchmark, explained in what HEM is. Both settings push in the same direction: a cautious estimate of spending and a cautious rate.

Does the buffer apply to investment loans and refinancing?

Yes. The minimum applies to new home lending by banks, whether the loan is for a home or an investment, and to refinancing with a new lender. Investors often feel it more, because their existing loans are assessed at a buffered rate too and rental income is counted only in part. Refinancing borrowers may be assessed under a lender’s limited exceptions if the new loan lowers their repayments.

What happens to the buffer when rates fall?

The buffer stays at 3 percentage points, but it sits on a lower product rate, so the assessment rate falls and borrowing power rises. The reverse happens when rates rise. The RBA cash rate page tracks the rate that drives those moves.

A worked example

A couple has $4,000 a month left after living costs and debts. A repayment calculator at 6% over 30 years says that pays for about $667,000. The lender assesses at 9% and approves about $497,000. Nothing is wrong with either figure: one is what the repayments cost today, the other is what the lender is allowed to approve.

Questions people ask

Is the serviceability buffer 3% in 2026?

Yes. APRA kept the minimum buffer at 3 percentage points when it reviewed it on 28 May 2026.

Can I avoid the serviceability buffer?

Not with a bank for a new loan. Non-bank lenders set their own assessment rates, and some banks make limited exceptions for refinancing to lower repayments.

Why is my bank’s borrowing figure lower than the calculator’s?

Usually because the bank tests your repayments at your rate plus the buffer and uses the higher of your declared and benchmark living costs.

Charles Touma runs your numbers at each lender’s assessment rate, so you know which one approves the amount you need before you apply. A free 30-minute call covers your income, debts and the lenders that fit. General information only, not credit advice. Sources: APRA, Prudential Standard APS 220 and the macroprudential settings announcement of 28 May 2026; APRA letter to ADIs on housing lending standards and exceptions, 2023, checked 17 October 2026. Example figures use the 6% example rate over 30 years.

General information only, not credit, legal or tax advice. Your situation is assessed properly before any recommendation. Government scheme details change; figures are current at the time of writing.