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Has Your Borrowing Power Changed?

August 18, 2026

Your borrowing capacity can change even if your income hasn’t. You might be earning the same income you were six months ago, but changes to interest rates, lender policies, existing debts and living expenses can all affect how much you may be able to borrow.

So, if you’re thinking about buying a home, refinancing or investing, it’s worth checking your borrowing capacity before you start making plans.

Here are some of the key factors that could affect how much you can borrow.

Interest Rates Can Affect Your Borrowing Power

Interest rates have been a major focus in 2026, and changes in rates can have a direct impact on borrowing capacity.

When interest rates rise, your potential loan repayments increase. Lenders also need to make sure you could continue to afford your loan if rates were to rise further.

As part of their assessment, lenders generally apply a 3% serviceability buffer to the interest rate on a home loan. For example, if your proposed loan rate was 6%, your application could be assessed at 9%.

This buffer is designed to make sure borrowers have some breathing room if circumstances change, but it can also reduce the amount a lender is willing to lend.

High Debt-to-Income Lending Limits

Another change borrowers should be aware of is APRA’s high debt-to-income (DTI) lending limits.

From 1 February 2026, banks have been limited in the amount of new lending they can provide to borrowers with a DTI ratio of six or more. The cap allows no more than 20% of new owner-occupier loans and 20% of new investor loans to have a DTI of six or more.

This doesn’t mean you automatically can’t borrow if your DTI is six or above. However, it may become more difficult depending on the lender and how much high-DTI lending they have already undertaken.

Your DTI generally looks at your total debt compared with your gross annual income. This can include your existing home loan, car loans, credit card limits and the new loan you’re applying for.

Your Credit Card Limits Matter

Did you know that your credit card limit can affect your borrowing capacity, even if you don’t owe anything on the card?

Lenders generally consider your available credit when assessing your ability to service a new loan. So, having several cards or a high combined credit limit could reduce the amount you’re able to borrow.

If you have credit cards you no longer use, it may be worth considering whether you still need them before applying for a home loan.

Your Living Expenses Are Taken Into Account

Your everyday spending is another important part of a home loan assessment.

Lenders look at your household expenses, including things like groceries, utilities, insurance, transport, childcare and other regular costs.

They may also compare your declared expenses against industry benchmarks, such as the Household Expenditure Measure (HEM).

This means that even if you feel like your spending is relatively low, the lender’s assessment may still use a higher benchmark figure, which can affect your borrowing capacity.

Existing Debts Can Reduce How Much You Can Borrow

Your existing financial commitments don’t disappear when you apply for a new home loan.

Car loans, personal loans, HECS-HELP debts and other ongoing commitments can all be considered when a lender assesses your borrowing capacity.

Buy Now, Pay Later accounts can also be taken into consideration by some lenders.

If you have multiple debts, there may be strategies worth considering to improve your overall position. Debt consolidation can sometimes help simplify repayments, but it’s important to consider the total cost and interest you’ll pay over the life of the loan.

Different Lenders Can Give You Different Answers

One of the most important things to remember is that not every lender assesses borrowing capacity in the same way.

One lender may be more flexible with self-employed income, while another may have a different approach to HECS-HELP debt, living expenses or investment income.

This means you could receive a different borrowing capacity calculation depending on which lender you apply with.

That’s where having a mortgage broker in your corner can make a difference.

At Connected Finance, we can compare lending policies across a range of lenders and help identify options that may be more suitable for your individual circumstances.

So, How Much Can You Actually Borrow?

Whether you’re looking to buy your first home, upgrade, refinance or purchase an investment property, understanding your current borrowing capacity is an important first step.

And remember, your borrowing power isn’t necessarily fixed. Changes to interest rates, lender policies, your income, debts or expenses can all affect the amount you may be able to borrow.

If it’s been a while since you last checked your borrowing capacity, it could be worth taking another look.

Ready to Find Out Where You Stand?

Don’t start house hunting based on an old borrowing capacity figure.

Get in touch with the Connected Finance team and we’ll help you understand your current position, compare your options and work out what could be possible for your next move.