Serviceability buffer
An extra margin lenders add to the interest rate when assessing your loan, to check you could still afford repayments if rates rose.
- APRA expects lenders to use at least 3 percentage points
- Applied in the lender's assessment, not to your actual rate
- A major factor in borrowing capacity
How it works
If a loan's rate is 6%, the lender tests your repayments at around 9% or higher. If you could not afford repayments at that rate, they reduce how much you can borrow.
Why it exists
It protects borrowers and lenders from rate rises. APRA, the banking regulator, sets the minimum expectation.
The buffer is why your borrowing capacity can feel lower than your real repayments suggest.
Common questions
Do all lenders use the same buffer?
Major banks follow APRA's guidance. Some non-bank lenders apply different rules.
Does the buffer change my interest rate?
No. It is only used to assess the loan.
Related terms
Sources
General information only. It does not consider your objectives, financial situation or needs, and is not financial, credit, tax or legal advice. Rules change, so check current law and get advice from a licensed professional before acting.