If you’re planning to buy a home, refinance, or invest in Perth, it’s important to understand that your borrowing power can change even if your income hasn’t.
Many borrowers assume that earning the same salary means they can borrow the same amount they could six or twelve months ago. In reality, lenders regularly adjust their assessment criteria, interest rates move, and regulatory requirements evolve. Together, these factors can significantly affect how much you can borrow.
At Fox Mortgages, we compare your situation across more than 30 lenders because every bank assesses borrowing capacity differently. Understanding where you stand before you start house hunting can save time, reduce frustration, and help you make more confident property decisions.
Why Interest Rates Affect Borrowing Capacity
One of the biggest influences on borrowing power is something most borrowers never see.
Australian lenders are required to assess home loan applications using a serviceability buffer. This means your ability to repay a loan is tested at a rate higher than the one you’ll actually pay. Currently, lenders generally assess repayments at your loan rate plus up to an additional 3%.
For example, if your home loan interest rate is 6%, the lender may assess whether you can afford repayments as though the rate were 9%.
This helps ensure borrowers can manage future rate increases, but it also means your borrowing capacity is usually lower than many online calculators suggest.
Even small changes in interest rates can have a significant impact on the amount a lender is willing to approve.
The Debt-to-Income Rule That Could Affect Your Approval
Another factor becoming increasingly important is your debt-to-income ratio (DTI).
DTI compares your total debts to your gross annual income. From 1 February 2026, APRA introduced limits on the proportion of new lending that banks can provide to borrowers with debts equal to six times income or more. Lenders are generally limited to allocating only 20% of new lending to these higher-DTI applications, with owner-occupier and investor loans assessed separately.
This isn’t a direct limit on individual borrowers, but it can affect approval outcomes.
If your total commitments include:
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- An existing mortgage
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- Car finance
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- Personal loans
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- Credit cards
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- Buy Now Pay Later facilities
your application may fall into a higher-risk category with some lenders.
The good news is that different lenders have different appetites for higher-DTI borrowers, which is why comparing options can make a substantial difference.
Unused Credit Cards Can Reduce Borrowing Power
One of the easiest ways to improve borrowing capacity is often overlooked.
Even if a credit card has a zero balance, lenders generally assess the full approved credit limit as a potential liability.
For example, having three credit cards with a combined limit of $30,000 may reduce your borrowing capacity even if you rarely use them.
Closing unnecessary cards before applying for a home loan can sometimes improve your borrowing position without affecting your day-to-day finances.
Living Expenses Matter More Than Ever
Most lenders don’t simply rely on the expenses you declare on your application.
They compare your spending against industry benchmarks, including the Household Expenditure Measure (HEM).
If your declared expenses fall below what the lender considers reasonable for your household size and income level, they may use a higher figure in their assessment.
This can reduce borrowing capacity, even for borrowers who are naturally careful with their spending.
Maintaining accurate bank statements and understanding where your money goes each month can help avoid surprises during the application process.
Existing Debts Add Up Quickly
Many borrowers don’t realise how much smaller debts can impact their borrowing power.
Lenders commonly assess:
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- HECS-HELP debt
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- Car loans
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- Personal loans
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- Store finance
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- Buy Now Pay Later accounts
as ongoing financial commitments.
Even relatively small monthly repayments can reduce the amount available for a mortgage.
In some situations, debt consolidation may improve borrowing capacity, but it’s important to consider both the short-term benefit and the long-term cost before making any decisions.
Why Different Lenders Give Different Answers
One of the biggest misconceptions in the home loan market is that all lenders calculate borrowing capacity in exactly the same way.
They don’t.
Some lenders may be more flexible with:
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- HECS-HELP debt
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- Self-employed income
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- Casual employment income
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- Overtime and bonuses
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- Investment property income
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- Debt-to-income ratios
This means two lenders reviewing the same application can arrive at very different borrowing limits.
That’s why working with a mortgage broker can provide access to opportunities that may not be available through a single bank.
How Much Can You Borrow in Perth?
With Perth property prices continuing to perform strongly and competition remaining high in many suburbs, knowing your borrowing power before making an offer has never been more important.
Your borrowing capacity can change due to interest rates, lending policy updates, living expenses, existing debts, and regulatory requirements, even when your income stays exactly the same.
At Fox Mortgages, we’ll compare your situation across our panel of more than 30 lenders, identify any factors that may be reducing your borrowing power, and help you understand exactly where you stand before you enter the market.
Find Out Your Current Borrowing Power
Whether you’re a first-home buyer, upgrader, investor, or looking to refinance, a borrowing capacity assessment can provide clarity and confidence.
You can use our Borrowing Power Calculator as a guide, but with so many things that impact borrowing capacity and lender policies it’s a good idea to have a broker assessment completed.
Contact Fox Mortgages today to discover how much you could borrow and explore your home loan options.
Disclaimer: This information is general in nature and does not take into account your individual objectives, financial situation, or needs. You should consider whether the information is appropriate for your circumstances and seek professional advice before making any financial decisions. All lending is subject to lender approval, eligibility criteria, fees, charges, and terms and conditions.