You might be earning the same income as you were six months ago, but that doesn't necessarily mean you can borrow the same amount.
Your home loan borrowing capacity can change over time, even when your income and employment remain the same.
Interest rates, existing debts, credit card limits, living expenses and lender policies all influence how much a bank may be prepared to lend.
If you're planning to buy your first home, upgrade, refinance or invest, understanding your borrowing capacity before making property plans is an important first step.
Here's what could be affecting your borrowing power in 2026.
Higher Interest Rates Can Reduce Borrowing Capacity
Interest rates have increased several times throughout 2026, affecting how much Australians may be able to borrow.
When interest rates rise, mortgage repayments become more expensive, which can reduce the amount a lender is prepared to approve.
Banks also assess whether you could afford repayments if interest rates increased further.
Under APRA's serviceability requirements, authorised deposit-taking institutions generally apply a 3% point buffer when assessing home loan applications.
For example, if your proposed home loan interest rate is 6%, the lender will generally assess your ability to repay the loan at 9%.
This helps lenders assess whether borrowers could manage higher repayments, but it can also reduce borrowing capacity.
New Debt-to-Income Lending Limits
From 1 February 2026, the Australian Prudential Regulation Authority (APRA) introduced limits on high debt-to-income (DTI) lending.
Under these rules, banks can allocate no more than 20% of new mortgage lending to borrowers with a debt-to-income ratio of six times or more. The limit applies separately to owner-occupier and investor lending.
Your DTI ratio compares your total debts with your gross annual income.
For example, if your household earns $150,000 annually and your total debts would be $900,000, your DTI ratio would be six.
These rules don't automatically prevent borrowers with higher DTI ratios from obtaining finance. However, they may affect lending availability depending on the lender's existing commitments and policies.
Credit Card Limits Can Affect How Much You Can Borrow
Even if you pay your credit card balance in full every month, your available credit limit can affect your borrowing capacity.
That's because lenders generally assess credit cards based on their approved limits rather than just the outstanding balance.
For example, a $20,000 credit card limit may reduce your borrowing capacity even if you owe nothing on the card.
If you have credit cards you no longer need, reducing your limits or closing unused accounts may improve your borrowing position.
However, it's worth reviewing your circumstances before making changes.
Living Expenses Matter More Than You Think
When assessing a home loan application, lenders review your regular living expenses to determine how much income you have available for mortgage repayments.
Many lenders use the Household Expenditure Measure (HEM) as a benchmark when assessing living costs.
If your declared expenses are lower than the lender's applicable benchmark, the lender may use the higher figure when calculating your borrowing capacity.
Your spending habits, household size and financial commitments can therefore influence how much you're able to borrow.
Existing Debts Can Reduce Your Borrowing Power
Car loans, personal loans, HECS-HELP debts and buy-now-pay-later commitments can all affect your borrowing capacity.
Even relatively small monthly repayments may reduce the amount a lender is willing to approve.
For some borrowers, paying down existing debts before applying for a home loan may improve their borrowing position.
However, every situation is different, and it's important to understand how individual lenders assess your commitments.
Different Lenders May Offer Different Borrowing Capacities
One of the biggest misconceptions about home loans is that every lender will approve the same amount.
In reality, lenders use different assessment methods and policies.
Some may assess self-employed income differently, while others may take a different approach to HECS-HELP debts, overtime, bonuses or rental income.
This means your borrowing capacity could vary significantly between lenders, even when your financial circumstances remain unchanged.
Working with a mortgage broker in Wollongong can help you compare lender policies and understand which options may suit your circumstances.
Planning to Buy a Home in Wollongong or the Illawarra?
Whether you're purchasing your first home, upgrading in Wollongong or investing across the Illawarra, knowing your borrowing capacity before you start searching can help you establish a realistic property budget.
It's also important to understand the difference between the maximum amount a lender may approve and what you feel comfortable repaying each month.
Higher borrowing capacity doesn't necessarily mean borrowing more is the right decision.
At Haus of Loans, we help buyers and homeowners across Wollongong, the Illawarra and Australia understand their borrowing options and compare suitable home loans.
How Much Can You Borrow?
If you haven't reviewed your borrowing capacity recently, your options may have changed.
Whether you're looking to buy, refinance or invest, we can help you understand your current borrowing position and identify opportunities that may improve your home loan options.
Get in touch with Haus of Loans to review your borrowing capacity and take the next step towards your property goals.
This article provides general information only. Borrowing capacity depends on individual circumstances, lender policies and lending criteria, which may change.