Home loan serviceability buffer: APRA's 3-point test

What the buffer is

The buffer is a stress test, not a rate you pay. When a lender decides how much it will lend you, it works out your repayments at a higher “assessment rate” and checks that your income still covers them.

APRA’s prudential practice guide APG 223 says that under Attachment C of Prudential Standard APS 220, ADIs “must apply a buffer over a loan’s interest rate of at least 3.0 per cent, unless determined otherwise by APRA”. As a formula:

assessment rate = the interest rate on the loan + at least 3.0 percentage points

The buffer is applied to the rate the borrower will pay on the loan, ignoring any introductory or “honeymoon” rate. That is why the amount a lender will offer can be lower than a simple repayment calculator suggests.

The buffer is a minimum. A lender can use a higher figure in its own policy, so two lenders can give you different borrowing limits on the same income.

The rule in force on 14 October 2026

• Buffer: APRA’s media release of 28 May 2026 lists the mortgage serviceability buffer as unchanged at 3 percentage points. APRA states no new start date because it kept the setting steady.
• Where it comes from: a federal prudential standard (APS 220), so there is no state-by-state difference. A lender in Perth and a lender in Hobart apply the same minimum.
• Who it covers: the guide addresses ADIs, the institutions APRA supervises. Whether a particular lender is an ADI is something to ask the lender.

The debt-to-income limit (from 1 February 2026)

APRA announced on 27 November 2025 that, from 1 February 2026, ADIs can lend:

• up to 20% of new owner-occupied loans, and
• up to 20% of new investment loans,

at a debt-to-income (DTI) ratio of six or more. The two limits apply separately. DTI is your total debt compared with your income, calculated as defined in APRA’s reporting standard ARS 223.0.

The limit applies to the lender’s whole book of new loans, not to you personally. It does not set a maximum DTI for an individual borrower. APRA excludes finance for building new dwellings, finance for buying newly erected dwellings, and bridging finance for owner-occupiers (APRA expects bridging arrangements to finish within twelve months).

APRA’s 28 May 2026 release confirmed these limits were unchanged.

Responsible lending: ASIC’s rules

The buffer is a prudential rule that protects the financial system. A different set of rules protects you as a borrower. ASIC, the federal corporate and consumer credit regulator, requires credit licensees not to enter into, suggest, or help you apply for a credit contract that is “unsuitable” for you. To meet that duty, a lender or broker must:

1. make reasonable inquiries into your financial situation, requirements and objectives;
2. verify your financial situation by taking reasonable steps;
3. assess whether the contract is not unsuitable for you; and
4. give you a written copy of the assessment if you ask for it.

In practice this is why you are asked for payslips, statements and details of your living costs. The buffer and the responsible lending test are separate checks, and a loan has to pass both.

Which professional to consult

A mortgage broker can explain how several lenders apply the buffer and compare borrowing limits (mortgage brokers). Ask what assessment rate each lender uses and whether it applies more than the 3-point minimum. A conveyancer deals with the contract and settlement, not the loan assessment. For your tax position, see a registered tax professional.