You might be earning the same income you were six months ago, but your borrowing power may have changed.
That’s because lenders look at more than your salary when assessing a home loan application. Interest rates, living expenses, existing debts, credit limits and lender policies can all influence how much you may be able to borrow.
Your borrowing power can also vary between lenders. Two banks may assess the same financial position differently and arrive at different outcomes.
If you’re planning to buy, refinance or invest, understanding your borrowing power before you make property plans can help you set a realistic budget and avoid surprises later.
So, what can affect your borrowing power?
Higher interest rates can reduce borrowing power
Interest rates have been a major focus in 2026, with multiple cash rate increases affecting household budgets and lending assessments.
When interest rates rise, your potential loan repayments increase. This can reduce the amount a lender may be prepared to lend because the lender needs to be satisfied that you can continue meeting your repayments if rates remain high.
Lenders also apply a serviceability buffer when assessing home loan applications. The Australian Prudential Regulation Authority (APRA) requires banks and other authorised deposit-taking institutions to assess home loan applications using a buffer of 3 percentage points above the loan interest rate.
For example, if the interest rate on a proposed home loan is 6%, the lender may assess your ability to repay the loan at 9%.
This doesn’t mean you will actually pay 9%. It is part of the lender’s assessment process.
However, it can affect your borrowing power.
Real-world example
Imagine two borrowers who earn the same household income and are looking to buy a similar property.
One has a relatively low level of existing debt and modest living expenses. The other has a car loan, several credit card limits and higher regular expenses.
Even though their incomes are the same, their borrowing power could be quite different.
That’s why looking at your overall financial position is so important.
High debt-to-income lending limits
Your debt-to-income ratio, or DTI, is another factor to understand.
DTI compares your total debt with your gross annual income. For example, if your total debt is $600,000 and your gross annual income is $100,000, your DTI is 6.
From 1 February 2026, APRA introduced limits on high-DTI lending. Banks can have no more than 20% of new mortgages above a DTI of six times gross income, with the limit applying separately to owner-occupier and investor lending.
The change does not directly place a cap on an individual’s borrowing power.
However, it can affect lending availability if a bank has reached its high-DTI limit.
Your total debt can include your existing mortgage, proposed new home loan, car loans and other credit commitments.
If you are planning to borrow at a high DTI, it may therefore be worth understanding which lenders may be more appropriate for your circumstances.
Credit card limits matter, even if you don’t use them
One of the more surprising factors affecting borrowing power is your credit card limit.
You may have a credit card that you rarely use. Perhaps you pay the balance in full every month and have never missed a repayment.
The lender may still consider the full credit limit when assessing your application.
For example, having a $15,000 credit card limit can affect your borrowing assessment even if the balance is currently $0.
If you have multiple cards or unused credit facilities, it may be worth reviewing whether you still need them before applying for a home loan.
However, don’t automatically close accounts or make changes simply to increase your borrowing power. It is worth understanding how any change could affect your broader financial position first.
Your living expenses can affect borrowing power
Lenders also look closely at household expenses.
These can include:
- Groceries
- Utilities
- Insurance
- Transport
- Education
- Entertainment
- Subscriptions
- Other regular household spending
Lenders may use a benchmark such as the Household Expenditure Measure, or HEM, when assessing living expenses. They may also consider your actual declared expenses.
This means two households with the same income can receive different borrowing outcomes.
Real-world example
Consider a couple earning $180,000 a year.
They have no children, relatively low living expenses and limited existing debt. Another couple earns the same $180,000 but has childcare costs, a car loan and higher household expenses.
Their borrowing power may not be the same.
This is one reason an online borrowing calculator can only give you an indication. A lender’s assessment considers a much broader picture.
Existing debts can reduce your borrowing power
Existing commitments can have a significant impact on how much you may be able to borrow.
These can include:
- Car loans
- Personal loans
- Credit cards
- Buy now, pay later commitments
- Existing mortgages
- HECS-HELP or other study debts
Lenders consider the repayments associated with these commitments when assessing your ability to service a new loan.
Debt consolidation may be an option in some circumstances. However, it needs careful consideration.
Combining short-term debts into a longer mortgage can reduce your regular repayments. It can also mean paying interest over a much longer period.
Before making changes, it is important to understand both the short-term and long-term implications.
Different lenders can give you different answers
This is one of the most important things to understand about borrowing power.
There isn’t necessarily one universal figure that every lender will give you.
Lenders have different policies, assessment methods and appetites for different types of borrowers.
For example, one lender may have a policy that suits a self-employed borrower. Another may take a different approach to certain types of income or existing debts.
Some lenders may also have different policies around investment lending, complex income structures or other circumstances.
This is where comparing lenders can be valuable.
Rather than assuming your bank is your only option, a mortgage broker can compare lending policies across a range of lenders and help identify options that may suit your circumstances.
What can you do if your borrowing power has fallen?
A lower borrowing figure doesn’t necessarily mean your property plans need to stop.
There may be areas of your financial position worth reviewing.
Depending on your circumstances, these could include:
Reviewing existing debts
Reducing certain debts may improve your overall borrowing position, although this needs to be assessed alongside your available cash and other financial goals.
Reviewing unused credit limits
Unused credit cards or facilities may still affect a lender’s assessment.
Understanding your expenses
Reviewing your household budget can help you understand where your money is going and how a lender may view your financial position.
Comparing lenders
Different lenders may assess the same borrower differently. Comparing options can help you understand whether another lender may be a better fit.
Reviewing your loan structure
If you already own property, your current loan structure may be worth reviewing before taking on additional debt.
Importantly, don’t make financial changes simply to maximise your borrowing power. The amount a lender is prepared to lend is not necessarily the amount you should borrow.
Your repayments need to remain comfortable within your broader financial position and goals.
So, how much can you actually borrow?
Your borrowing power isn’t a fixed number.
It can change as interest rates move, lender policies change and your personal circumstances evolve.
That’s why it can be useful to review your position before you start attending open homes or making offers.
At Ironbark Group, we look beyond a single borrowing calculator. We take the time to understand your income, expenses, existing commitments and property goals, then compare lending options across our panel of lenders.
Whether you’re buying your first home, upgrading, refinancing or investing, we can help you understand your current borrowing position and what finance options may be available.
Speak to Ironbark Group today to review your borrowing power and understand your options before you make your next property move.