Negative Gearing

If you’ve been looking at buying a home, refinancing, or investing in property recently, you’ve probably heard this phrase more than once:

“Your borrowing power isn’t what it used to be.”

Even though interest rates have stabilised compared to the sharp rises of the past few years, borrowing power is still a major discussion point in 2026. So why is that the case?

Let’s break it down in plain English.

What is borrowing power?

Borrowing power is the amount a bank is willing to lend you, based on:

your income (and how stable it is)
your existing debts
your living expenses
interest rates and bank assessment rules

It’s not just about what you earn — and this is where a lot of people get caught out.

Why borrowing power is still under pressure

1. Banks still assess loans at much higher “test rates”

Even if your actual loan rate might be around, say, 6–6.5%, banks don’t assess your loan at that rate.

Most lenders add a buffer (often around 3%) to make sure you could still afford repayments if rates rose again in the future.

That means:

Your loan is assessed closer to 9%, not your actual rate.
This significantly reduces how much you can borrow — even if your repayments would be comfortable today.

This buffer is one of the biggest reasons borrowing power feels tighter than expected.

2. Cost‑of‑living assumptions have increased

Banks use standardised benchmarks to estimate everyday living costs (food, utilities, transport, schooling, insurance, etc).

These assumed expenses have increased over time due to:

higher energy costs
insurance rises
groceries and transport becoming more expensive

Even if you live quite frugally, lenders must still apply minimum expense assumptions — which can reduce borrowing capacity on paper.

3. Investor lending rules remain conservative

For property investors, borrowing power is often further restricted because:

investment loans are assessed more conservatively
rental income is usually “shaded” (e.g. only 70–80% counted)
existing investment debts stack up quickly in serviceability calculators

This is why many investors are surprised to find their borrowing power capped sooner than expected.

4. Different banks = very different results

This is one of the most important points — and one that doesn’t get talked about enough.

Two banks can give wildly different borrowing power results for the exact same client.

That’s because:

each lender has its own calculator
income types are treated differently
expense assumptions vary
rental income and bonuses are assessed in different ways

This is a big reason borrowing power is still being debated — it’s not a single rule, it’s lender‑specific.

So why is this such a hot discussion right now?

Because many people are:

re‑entering the market after sitting out rate rises
upgrading homes as family needs change
looking to refinance after fixed rates have expired
wanting to invest, but unsure if they still qualify

There’s often a gap between expectation and reality, and that’s where frustration (and confusion) comes in.

The good news

Borrowing power isn’t “broken” — but strategy matters more than ever.

In many cases, opportunities still exist by:

choosing the right lender (not just the lowest rate)
restructuring debts intelligently
timing applications correctly
understanding how banks actually assess your situation

This is where tailored advice can make a significant difference.

Final thoughts

If you’re feeling unsure about what you can borrow — or you’ve been told “no” by a bank — it doesn’t necessarily mean your plans are off the table.

It does mean that lending rules are more nuanced than they used to be, and getting the structure right is key.

If you’d like a clear, realistic view of your options, a proper assessment before jumping online or applying directly can save a lot of time (and disappointment).

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