You might be earning the same income you were six months ago, but that doesn’t necessarily mean you can borrow the same amount. 

Your borrowing capacity can change over time as interest rates, living expenses, existing debts, credit limits and lender policies shift. Understanding your current borrowing power can help you set realistic property goals and avoid surprises when you’re ready to apply for a loan. 

Whether you’re planning to buy your first home, refinance your existing loan or invest in property, it’s worth knowing where you stand before you start making plans. 

Here are some of the key factors that can affect your borrowing capacity. 

Higher interest rates can reduce your borrowing power 

Interest rates remain an important factor in how lenders assess your ability to service a home loan. 

When interest rates rise, repayments generally increase. This can reduce the amount a lender considers you able to borrow because they need to assess whether you can comfortably manage your repayments both now and if circumstances change. 

Lenders also assess your application using a serviceability buffer. APRA currently requires a minimum mortgage serviceability buffer of 3 percentage points. This means that if your proposed home loan rate is 6%, the lender may assess your ability to repay the loan at a rate of 9%. 

This buffer is designed to help ensure borrowers can continue meeting their repayments if interest rates increase, but it can also affect your overall borrowing capacity. 

High debt-to-income lending limits 

Since 1 February 2026, APRA has applied limits to high debt-to-income (DTI) lending by authorised deposit-taking institutions (ADIs). 

Under the rules, banks can have up to 20% of their new owner-occupier and investor lending at a DTI ratio of six times income or higher. The limits apply separately to owner-occupier and investor loans. 

The DTI limits don’t automatically reduce your borrowing capacity. Instead, they act as a portfolio-level limit on how much high-DTI lending each bank can provide. 

However, if your total debt is six times or more than your gross annual income, the policy may become relevant to your application, particularly if a lender is approaching its high-DTI lending limit. 

Credit card limits can affect your borrowing capacity 

Your credit card balance isn’t the only thing lenders consider. The total credit limit available to you can also affect your borrowing assessment. 

Even if you rarely use a credit card or pay the balance in full each month, a high available credit limit may be treated as a potential financial commitment when a lender assesses your application. 

If you have credit cards or other credit facilities you no longer need, reducing or closing unused limits before applying for a home loan may help improve your borrowing position. Before making any changes, it’s worth considering how they could affect your overall financial circumstances. 

Your living expenses matter 

Lenders look at your household expenses when assessing how much you can afford to borrow. 

They may compare your declared living expenses with a benchmark such as the Household Expenditure Measure (HEM). If your actual expenses are higher than the benchmark, the lender may use your higher actual expenses in its assessment. 

Your spending on things such as groceries, utilities, transport, insurance, education and entertainment can therefore influence your borrowing capacity. 

Existing debts can reduce borrowing power 

Your current financial commitments can have a significant impact on how much you may be able to borrow. 

Lenders may consider debts such as: 

• Existing home loans
• Car loans
• Personal loans
• HECS-HELP or other student debt
• Buy Now, Pay Later commitments
• Credit card limits

The more of your income that is committed to existing debts and repayments, the less capacity you may have for a new home loan. 

Debt consolidation can be an option in some circumstances, but it needs to be considered carefully. While combining debts may reduce your regular repayments, extending short-term debt over a longer loan term could result in more interest being paid over time. 

Different lenders may assess you differently 

One of the biggest things to keep in mind is that borrowing capacity isn’t necessarily the same with every lender. 

Lenders can have different policies around income, living expenses, self-employed income, credit commitments, student debt and other financial circumstances. 

For example, one lender may have a more flexible approach to self-employed income, while another may take a different approach to HECS-HELP debt or certain types of expenses. 

That means it can be worthwhile looking beyond a single lender when assessing your options. 

Working with a Mortgage Broker can help you compare lending policies across a range of lenders and identify options that may be more suitable for your circumstances. 

So, how much can you actually borrow? 

Your borrowing capacity isn’t a fixed number. It can change as interest rates, lender policies, your debts, expenses and personal circumstances change. 

If you’re thinking about buying, refinancing or investing, understanding your borrowing position early can help you plan with greater confidence. 

Want to know how much you could potentially borrow? 

Get in touch with our team today. We can review your current circumstances, help you understand your borrowing capacity and compare options from a range of lenders.