Picture walking into a shoe shop that knows your size, only to find every pair has quietly shrunk by half a size since your last visit. That's roughly what has happened to home loan borrowers this year.
Each rate rise doesn't just make repayments more expensive. It also reduces how much a lender will let you borrow in the first place. Ahead of the RBA's 3 November decision, Canstar estimated that one more 0.25% rise would cut around $10,700 from the borrowing power of an average full-time earner on $108,650 a year. That would take the total reduction since January to around $58,100 (about 11%). For a couple on two average incomes, the hit is roughly $116,200.
The RBA went ahead with that rise. So if you were pre-approved earlier in the year, or you've been using an old figure from an online calculator, your number has very likely moved.
Why borrowing power falls when rates rise
Lenders don't just check whether you can afford repayments at today's rate. Under guidance from the banking regulator APRA, they test whether you could still afford them if rates were 3 percentage points higher. In industry-speak this is the 'serviceability buffer'.
Example:
- Rate on offer: 6.50%
- Serviceability buffer: +3.00%
- Rate the lender assesses you at: 9.50%
There's a second limit too. Since February 2026 banks have been restricted in how much of their new lending can go to borrowers who owe six or more times their income (known as a 'debt-to-income' or DTI ratio). Most borrowers are well inside that limit. If your loan is large relative to your income, though, it can affect which lenders will consider you.
The levers you can actually pull
You can't change the cash rate. You can change how a lender sees your application. Here's where the low-hanging fruit usually is:
- Cut your credit card limits. Lenders assess the limit rather than the balance. A $15,000 card you never use is treated as if you could max it out tomorrow. Reduce limits or close cards you don't need before you apply.
- Clear small debts. Personal loans, car loans and buy now pay later accounts all reduce borrowing power. Paying off a small loan can lift your capacity by much more than the balance you clear.
- Review your living expenses. Lenders look closely at your bank statements. Three months of tidy, realistic spending makes a stronger application than a last-minute clean-up.
- Make sure all your income is counted. Overtime, allowances, bonuses and rental income are treated differently by different lenders. Some count more of it than others.
- Look at the loan structure. Loan term, repayment type and whether you borrow with someone else all change the result.
Hot Tip: Borrowing power isn't one fixed number. Each lender uses its own calculator and credit policy, so the same application can produce noticeably different results from one lender to the next. That's exactly why it pays to compare across a wide panel before you start house-hunting.
Should you wait until rates fall?
It's a fair question. If rates fall, borrowing power rises again. But the major banks don't expect cuts until the second half of 2027 at the earliest and forecasts have a habit of moving. Meanwhile Brisbane values have fallen 8.3% from their May peak and buyers have more negotiating power than they've had in years.
There's no single right answer. The better question is this: what can you comfortably afford today, with a buffer in case rates rise a little further? If that lines up with the property you want, waiting for the perfect moment may cost you more than it saves.
Get your real number
Our online calculators are a good starting point for a ballpark figure. For an accurate answer, talk to us. We'll look at your full situation and compare what lenders across our panel of 50+ are prepared to lend you. In most cases there's no broker fee to pay. Call (07) 3194 0888 or email [email protected].
This article contains general information only and does not take into account your personal objectives, financial situation or needs. Consider whether it is appropriate for you and seek personal advice before making any decision. Borrowing power estimates are published by Canstar and are for illustration only. All applications are subject to lender assessment and approval. Sources: Canstar (via Australian Broker, 2 November 2026); Australian Prudential Regulation Authority; Reserve Bank of Australia; Cotality; Broker Daily.
