What the buffer is for
Under APRA’s framework, banks have to apply some minimum criteria when they assess whether a borrower can repay, and one of them is a buffer of at least 3 per cent added on top of the housing loan’s interest rate. APRA describes its purpose like this:
“The serviceability buffer provides a contingency for rises in interest rates over the life of the loan, as well as for any unforeseen changes in a borrower’s income or expenses.”
APRA, letter to authorised deposit-taking institutions, 9 June 2023
The rate repayments are tested atThe loan’s rate plus the buffer.
At least 3 percentage pointsAPRA’s minimum buffer, as at October 2026.
The loan’s own rateWhat the product actually charges.
How it reached 3 points
On 6 October 2021, APRA told banks it expected them to assess new borrowers at a rate at least 3.0 percentage points above the loan product rate, up from the 2.5 points it said banks commonly used at the time. It said the increase applied to all new borrowers.
The reasons APRA gave were about debt. In the June quarter of 2021, it said, more than 20 per cent of the banks’ new lending went to borrowers who had borrowed more than six times their pre-tax income. It chose the buffer over two other tools it considered, an interest rate floor and a limit on high debt-to-income lending, saying the buffer works as a cap on leverage, is fairly easy to put in place and does not affect mortgage interest rates.
APRA also estimated the effect. Setting aside the other parts of a serviceability assessment, it said a 0.5 percentage point rise in the buffer would cut the typical borrower’s maximum borrowing capacity by around 5 per cent. It added that some borrowers were already held back by the floor rates lenders use, and that many do not borrow up to their maximum.
Where it stands, as at October 2026
| Setting | What APRA says |
|---|---|
| Serviceability buffer | Remains at 3 percentage points. |
| High debt-to-income lending | Unchanged: banks may lend up to 20 per cent of new owner-occupied loans, and up to 20 per cent of new investment loans, at a debt-to-income ratio of six times or more. |
| When the limits began | 1 February 2026, measured each quarter for the larger lenders APRA classes as significant financial institutions and on a four-quarter rolling measure for smaller ones, with the owner-occupier and investor portfolios counted separately. |
| Who the limits reach | New lending, not existing borrowers. Bridging loans for owner-occupiers and loans to buy or build new dwellings are exempt. |
APRA issues a semi-annual update on these settings, so a later announcement can change any line above. Its news and publications page is where a change would appear.
Why a refinance can meet it
APRA said in 2021 that the buffer applies to all new borrowers. A refinance with a new lender is a new loan, which on this guide’s reading is why a borrower assessed years ago meets the test afresh, at today’s rate plus today’s buffer. In its June 2023 letter, APRA said some borrowers seeking to refinance with another lender may no longer meet standard criteria, and gave reasons that vary: some may fail the buffer because of higher interest rates and the cost of living; some may have less equity after housing prices fell; and some may have had their circumstances change.
The same letter describes a way through that some banks had announced: an exception to policy, where a bank approves a loan that does not meet a standard criterion such as the buffer. APRA allows exceptions if they are managed prudently and kept limited, and said that for a borrower refinancing, the bank could weigh things the standard test leaves out, such as how the borrower has repaid in the past. Historically, it said, serviceability exceptions have made up between 2 and 3 per cent of banks’ total housing lending. More on what is left when a new loan is refused is on page 6.
Which lenders it covers
The buffer is APRA’s expectation of authorised deposit-taking institutions, or ADIs, the banks and other deposit-takers APRA supervises. APRA wrote in 2021 that it can make rules for lenders that are not ADIs only if they are found to contribute materially to risks of instability in the financial system. In its 2025 paper on debt-to-income limits, it put those other lenders at around 4 per cent of total residential mortgage credit, and said they are not subject to its active macroprudential tools, although it has the power to extend them.
None of this replaces a lender’s own assessment. APRA’s 2023 letter reminds banks that responsible lending obligations, which ASIC administers, apply too.
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