Glossary · Australian property
APRA serviceability buffer.
Banks must assess a borrower's ability to repay at the loan rate plus 3 percentage points, not the actual rate offered.
APRA (Australian Prudential Regulation Authority) requires authorised deposit-taking institutions to assess loan serviceability at the borrower's actual rate plus a 3 percentage point buffer. This is the single biggest reason borrowing capacity is lower than online calculators suggest.
The buffer was 2.5% pre-October 2021 and 3.0% since. A borrower at a 6.5% actual rate is assessed at 9.5% to determine whether they can still afford repayments under stress.
Debt-to-income (DTI) ratios above 6× the borrower's gross income trigger additional scrutiny under APRA's prudential standards. Most lenders apply a 30% DTI guardrail at the application stage.
Source
APRA Prudential Standard APS 220 (Credit Risk Management).
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