Borrowing power in Australia has changed again for FY2026–27.
Following higher interest rates, new APRA lending requirements and tax changes from 1 July 2026, many borrowers are wondering how much they can now borrow. While some changes make it harder to qualify for a home loan, others may slightly improve borrowing capacity, depending on your income and financial situation.
What Changed, Financial Year by Financial Year
The Tax Rate on Your Income
FY25–26: The 16% tax rate applied to taxable income between $18,201 and $45,000.
FY26–27: From 1 July 2026, that rate drops to 15%. This slightly improves take-home pay for many working borrowers, which may help the serviceability surplus lenders use when assessing home loan borrowing capacity. The proposed $1,000 instant tax deduction is expected to apply from the 2026–27 income year, subject to final legislation and implementation. The proposed $250 Working Australians Tax Offset is expected to begin from 2027–28, so neither measure should be treated as an immediate monthly cash flow increase until the final rules are confirmed.
Negative Gearing for Investors
FY25–26: Under current rules, rental losses on investment properties could generally be offset against salary and other taxable income, which some lenders considered when assessing investor borrowing capacity.
FY26–27: The 2026 Federal Budget proposed limiting negative gearing for established residential properties purchased after 7:30 pm AEST on 12 May 2026, with the main tax change applying from 1 July 2027. Existing properties held before budget night are expected to be grandfathered, and eligible new builds are treated differently. For borrowers, the practical issue is that lenders may adjust how they treat future tax benefits when assessing negative gearing borrowing power.
The APRA DTI Cap
FY25–26: From February 2026, APRA requires authorised deposit-taking institutions (ADIs) to limit new residential mortgage lending with a debt-to-income (DTI) ratio of 6 or higher to 20% of new lending, applied separately to owner-occupier and investor portfolios. While this does not directly change borrowing calculators, it can affect which lenders have capacity to approve higher-DTI applications.
The 3% Serviceability Buffer
FY25–26: APRA’s 3% serviceability buffer remained a major part of lender assessment. The buffer means many borrowers are assessed at an interest rate higher than the rate they actually pay.
FY26–27: With home loan rates materially higher after the 2026 cash rate increases, the assessed rate can sit well above the actual loan rate. APRA has confirmed the mortgage serviceability buffer remains at 3%. This continues to be one of the biggest constraints on home loan serviceability Australia-wide.
How to Use This Information
Understanding what changed is not enough; the question is how to position your application given the new landscape. Four things are worth doing before any application in FY26–27:
• Model your position at the assessed rate, not the actual rate. Where actual home loan rates are in the mid-6% range, APRA’s 3% serviceability buffer can push assessment rates into the mid-to-high 9% range, creating a significant difference between what appears affordable and what a lender may approve.
• If you have existing investment debt, map your DTI before choosing a lender. The cap is a portfolio constraint, not a binary limit; different lenders have different headroom remaining at different points in the year.
• Understand the tax position on any investment property you’re considering. For established residential properties purchased after 7:30 pm AEST on 12 May 2026, proposed negative gearing changes may affect future tax treatment from 1 July 2027 if legislated, so borrowers should seek professional tax and lending advice.
• Use the income improvements strategically. Higher take-home from the tax rate cut improves your serviceability surplus; a broker can show you exactly how much.
The lender that gives you the best outcome in FY26–27 is not necessarily the one with the lowest advertised rate. It’s the one whose credit policy best matches your specific income type, debt profile, and property strategy. That selection process is the whole job.
Where Safe Haven Finance Fits In
Payal Varma and the Safe Haven Finance team work across more than 50 lenders, modelling each client’s real borrowing position under the new 2026 rules before any application is submitted. With close to 20 years of banking, mortgage broking and lending experience, Safe Haven Finance helps borrowers across Australia find the right lender for their income structure, not just their deposit. If you’re looking for an experienced mortgage broker Australia borrowers can rely on, the focus is on matching your financial profile with the lender whose credit policy best suits your circumstances.
Book a free consultation, and visit us at safehavenfinance.com.au orcall +61 433 564 936. Follow Safe Haven Finance onInstagram, Facebook, andLinkedIn.
Frequently Asked Questions
Q: Does the tax rate cut on 1 July 2026 actually improve my borrowing capacity?
Answer: Slightly, yes. Higher after-tax income improves the serviceability surplus lenders calculate, though the effect is modest compared with the higher assessment rate created by APRA’s 3% serviceability buffer.
Q: Does the APRA DTI cap mean I can’t borrow above 6x my income?
Answer: No, it limits how many such loans a lender can write, not whether you personally can get one. The cap primarily determines which lender has capacity to approve your application.
Q: How does the negative gearing change affect my borrowing power as an investor?
Answer: For established residential properties purchased after 12 May 2026, some lenders may adjust how they assess future tax benefits, depending on final legislation and individual lender policy. The impact on borrowing capacity will vary based on income, property type, lender policy and the final legislation.
