Home loan interest rates get all the attention. Lending policy gets almost none — and policy is what decides whether you get approved and for how much.
Policy changes most weeks. Most of it is administrative and not overly relevant to borrowers. But in the last week of August, several lenders made changes that directly affect borrowing capacity for specific groups of people. None of them were advertised. Here’s what actually moved.
1. Investors: more of your rent now counts
Lenders don’t count all of your rental income when assessing a loan. They “shade” it, assuming some of it will be lost to vacancy, maintenance and management fees.
A lender has now lifted its shading:
– 90% of rent counted for standard investment lending at 70% LVR or below (previously 80%)
– 95% of rent counted for SMSF investment lending at 70% LVR or below
– 85% of rent counted for both, where the LVR sits between 70.01% and 80%
On a property renting for $600 a week, moving from 80% to 90% means an extra $60 a week of income visible to the lender. Across two properties, it can be the difference between an approval and a decline.
The LVR condition matters. This benefits investors with equity, not those buying at maximum leverage.
2. Investors: the rental yield cap has lifted
A separate and less well-known constraint: lenders cap the yield they’ll accept for servicing purposes.
If you buy a property returning 8% gross, a lender may assess it as though it returns 6% — no matter what the lease says. The reasoning is that unusually high yields often signal higher risk or lower capital growth.
One major has now raised that cap from 6% to 7%.
This is most relevant if you’re looking at regional property, smaller units, dual-key configurations, or anything where the yield is doing the heavy lifting in your strategy. It’s worth noting the cap is applied manually by credit assessors at that lender rather than automatically in the calculator, so it’s not always visible in an initial quote.
3. Shift workers: 100% of overtime, verified in three months
Overtime is one of the most inconsistently treated income types in the market. Many lenders shade it by 20% or more. Some require two years of history before counting any of it.
For workers whose overtime is a permanent feature of the role rather than an occasional bonus, that treatment substantially understates their real income.
A lender has expanded its essential services criteria to include frontline roles across:
– Energy
– Water and sewerage
– Aviation
– Public transport
– Rail
For eligible employees in those sectors, 100% of overtime income can be used for servicing, with a minimum three-month verification period.
The size of this depends on your overtime load. On $30,000 a year of overtime, the gap between 80% and 100% counted is $6,000 of assessable income — which can translate to tens of thousands in additional borrowing capacity.
Eligibility is role-specific. Working in one of those industries isn’t automatically enough; the specific role has to appear on the lender’s list.
4. Private health insurance folded into living expenses
Lenders assess your living expenses using the greater of your declared expenses or a benchmark called HEM (the Household Expenditure Measure). Some costs sit inside HEM. Others are added on top.
One lender has moved private health insurance inside HEM, under medical and health, rather than treating it as an additional ongoing commitment.
For a family policy at $400–500 a month, that’s $5,000–6,000 a year that stops reducing your assessed surplus at that lender — while continuing to reduce it at lenders that treat it separately.
This is a good illustration of why identical applicants receive different answers from different lenders. The difference often isn’t your file. It’s their policy.
5. First home buyers living at home: a small step backwards
Not everything moved in borrowers’ favour.
A major lender has increased the minimum board expense it assumes for customers living with relatives, from $500 to $600 per month.
This is applied regardless of what you actually pay. Even if you live at home rent-free, the lender assumes $600 a month leaves your account.
The impact is modest — $1,200 a year in additional assessed expenses, which typically reduces borrowing capacity by somewhere between $5,000 and $7,000 depending on the rest of your profile. But if you’re borrowing at your limit, it’s enough to matter, and lenders vary in how they apply this assumption.
Also worth knowing
Faster valuations. A lender has expanded its automated valuation tool to all states and territories. Where a property meets the criteria, the valuation is ordered automatically during assessment — removing a step that commonly adds days to a timeline. Particularly useful when you’re working to a finance clause.
Gifted deposits need paperwork. A lender has introduced a formal gifted funds declaration. If you’re receiving help with your deposit, the lender needs a signed statement that the money is a genuine gift rather than a loan. If it looks like a loan, a repayment gets assessed against it and your capacity falls. Have the gift letter, evidence of the source of funds, and the money seasoned in your account before the application goes in.
What to take from this
Five changes in a single week, none of them announced to borrowers, all of them affecting the number at the bottom of an assessment.
The practical implication: a borrowing capacity figure has a shelf life. If you were assessed six or twelve months ago and the number didn’t work, that assessment was run against policy settings that have since changed, in some cases significantly, and in your favour.
Re-running a scenario against current policy costs nothing and takes very little time. If you’ve got a purchase or a refinance that stalled, it’s worth doing before you assume the answer is the same.