How serviceability works in Australia (2026 edition)

1. What is serviceability?

Serviceability is the lender's test of whether a borrower can comfortably afford the proposed loan repayments plus their existing commitments plus ordinary living expenses, with a buffer for future rate rises. It is the single biggest gate between an application and a "yes".

Two regulators shape it in Australia: APRA (prudential standards for ADIs — the buffer rule) and ASIC (responsible-lending obligations under the National Consumer Credit Protection Act). Brokers and lenders share liability for getting the assessment right.

2. The assessment rate

Lenders never assess a loan at the headline rate the customer would actually pay. Instead they stress it. The assessment rate is:

In 2026, the typical numbers are:

• actual_rate — the variable/fixed rate the customer would pay (e.g. 6.14% for CBA OO P&I)
• APRA buffer — 3.0% for every ADI since November 2021
• min_assess_rate (often called the floor) — typically 5.25% across the major-four

So a 6.14% rate becomes a 9.14% assessment rate at most majors. Repayments are then computed at that stressed rate over the loan term.

3. The APRA 3% buffer — a brief history

The serviceability buffer is set by APRA under prudential standard APS 220:

The buffer is technically a "floor below which lenders should not go". Lenders may apply higher buffers as policy — some non-banks routinely add 3.5%.

4. Income shading by income type

Lenders don't take gross income at face value. Each income type is shaded — multiplied by a haircut to account for variability and continuity risk.

This is where lenders most visibly disagree — see the lender directory for the per-lender shading table.

5. The HEM benchmark

The Household Expenditure Measure (HEM) is published quarterly by the Melbourne Institute. It estimates the minimum sensible spend on essentials + a "modest discretionary" allowance, segmented by household composition, location and income band.

Lenders use HEM as a floor for declared living expenses — if the borrower's declared expenses are below HEM, the lender substitutes HEM. The actual figure isn't published in dollars (it varies by every applicant profile), and each lender applies it through its own multiplier:

Most lenders apply HEM as published. Of the 51 lenders on LendScope's panel, 48 use 1.00× — NAB and ANZ among them, read from their own serviceability workbooks — and 3 use 1.05×, a figure a published guide confirms for one of them. The multiplier still matters: on the homepage sample scenario ($167k salary, a $640k loan on an $800k home), moving NAB from 1.00× to 1.05× lowers its maximum loan by about $19K.

6. Existing liabilities

Three liability classes hit serviceability the hardest:

1. Existing loans — assessed at the existing repayment, often grossed up by the APRA buffer if a variable rate, or at the loan's actual fixed rate if fixed for >2 years remaining.
2. Credit cards — assessed not on the balance but on the limit: 3.8% of it a month at 40 of the 48 lenders accepting broker business, the big four banks among them, and 3.0% at four. A $30,000 limit therefore costs $1,140 a month at 3.8%, whatever the balance.
3. HECS / HELP — the actual ATO repayment based on income bands, deducted from gross. Doesn't compound but does scale linearly with income.

7. The DTI cap

Even if a borrower passes serviceability, lenders apply a debt-to-income (DTI) cap as a secondary gate. Calculated as:

APRA has been encouraging ADIs to limit DTI > 6× exposure to less than 30% of new lending. In practice, most majors will quietly soft-decline at DTI > 7× and aggressively decline beyond 8×. Non-banks tolerate higher DTI on a case-by-case basis.

8. A worked example

A PAYG couple on $110,000 each, no children, buying a $1.1M home in Sydney with an $850,000 loan over 30 years, and one credit card with a $15,000 limit — run through LendScope's engine at CBA:

• Gross household income: $220,000
• Net household income after tax and the Medicare levy: $168,024 a year = $14,002 a month
• Assessment rate: CBA's 6.09% variable + a 3.00% buffer = 9.09% (above its 5.40% floor)
• Repayment at 9.09% on $850,000 over 30 years: $6,894 a month
• Living costs: no expenses declared, so HEM for the household × 1.05 = $5,082 a month (the 1.05 on file for CBA is one no published source confirms — see section 5)
• The $15,000 card at 3.8% of the limit: $570 a month
• Surplus: $14,002 − $6,894 − $5,082 − $570 ≈ $1,455 a month ✓ passes

The same couple at NAB, Westpac and ANZ lands within $70 a month of CBA's surplus; at Macquarie the maximum loan is about $35K higher. LendScope runs all 51 side by side so you don't have to.

9. Why lenders disagree

Two lenders given identical inputs can produce maximum loans tens of thousands of dollars apart. On the homepage sample scenario, the highest and lowest of the lenders accepting broker business are $62K apart. What moves the figure — each measured on that scenario at NAB, and recomputed from LendScope's engine by a test whenever the panel changes:

1. Rate differential — a headline rate 0.30% lower adds about $20K of borrowing.
2. HEM multiplier — 1.05× instead of 1.00× removes about $19K.
3. Income shading on variable income — the biggest swing for self-employed and casual workers.
4. Card limits — on a $30K limit, assessing 3.8% a month instead of 3.0% removes about $29K.
5. Rental shading — on $50K a year of rent, counting 75% instead of 80% removes about $13K.
6. Floor rate — 35 of the 48 lenders accepting broker business assess at no less than 5.25%; one sits lower, at 5.10%, and the highest floor on the panel is 7.25%.

10. Tools and references

• LendScope's serviceability calculator — runs all of the above across 51 lenders in real time.
• Broker glossary — definitions for ACL, NCCP, DTI, LMI, LVR, HEM, APRA.
• APS 220 (APRA) — the prudential standard that sets the buffer.
• HEM explainer (Melbourne Institute) — methodology behind the benchmark.

Run a scenario in LendScope →