If you have been house-hunting on Sydney’s North Shore lately, you may have noticed something frustrating: the amount a lender will approve can feel smaller than your income suggests. After the Reserve Bank held the cash rate at 4.35% on 16 June 2026, and with two regulatory rules now shaping every application, it is worth understanding exactly how your borrowing capacity is calculated.
The serviceability buffer is still 3%
When a bank assesses your home loan, it does not test you at the actual interest rate you will pay. Under APRA rules, it adds a buffer of 3 percentage points on top of the lender’s assessment rate. The idea is to check you could still manage repayments if rates rose.
This buffer has not changed in 2026. It means that even though the cash rate has held steady, you are being assessed on a repayment well above the rate on your loan contract. For a buyer in Chatswood or Lane Cove comparing a unit to a freestanding home, the buffer is often the single biggest reason an approval comes in lower than expected.
The new debt-to-income cap
From February 2026, APRA introduced a second control. Lenders must now limit the share of new home loans written at a debt-to-income (DTI) ratio of six or more to no more than 20% of their new lending, measured each quarter.
In plain terms, a DTI of six means borrowing six times your gross annual income. The cap does not ban these loans outright, but because banks have to manage their quota, some applications that sit at the higher end can be harder to place at certain lenders at certain times of the quarter.
A few things are worth knowing:
- The limit applies to owner-occupier and investor lending separately.
- Loans to build or buy a brand-new dwelling, and owner-occupier bridging loans, are generally exempt.
- Investors tend to sit closer to the cap, so investment buyers in higher-priced suburbs like Gordon or Willoughby feel it most.
What this means for a North Shore buyer
Two rules pulling in the same direction can shrink borrowing capacity from both ends. The buffer raises the repayment you are tested against; the DTI cap limits how far some lenders will stretch relative to income. The result is that two people with the same salary can receive very different approvals depending on which lender they apply to and how that lender is tracking against its limits.
This is where shopping a single bank can cost you. Assessment rates, how income types are treated, and current DTI appetite vary widely between lenders. A few practical steps can help:
- Reduce or close unused credit card limits before applying, as the limit counts against you even if the balance is zero.
- Clear small personal or car loans where you can.
- Have clean, up-to-date payslips and income evidence ready so your capacity is assessed accurately the first time.
- Compare lenders rather than assuming your existing bank offers the most.
Talk it through before you make an offer
Borrowing capacity is rarely a single number. It depends on the lender, your income mix and your existing commitments. Knowing your real position before you bid at an Artarmon or St Leonards auction can save you a great deal of stress.
At Wonderful Global, we are available 24/7 and aim to provide a solution within 24 hours of receiving your documents. We work with borrowers across Chatswood, Willoughby, Artarmon, St Leonards, Lane Cove, Gordon and the wider North Shore, and we offer service in English, Mandarin and Cantonese. To map out your borrowing capacity across multiple lenders, call +61 404 838 365, get in touch, or read more about a first home buyer loan.
This article is general information only and does not take your personal circumstances into account. Consider whether the information is right for you before acting on it.