What is the APRA Mortgage Stress Test?
The Australian Prudential Regulation Authority (APRA) dictates that banks must stress-test a borrower's ability to service home loans. They apply a serviceability buffer of +3.0% on top of the mortgage's current interest rate.
This means if you apply for a loan at 6.2%, banks assess your repayment capacity at 9.2%.
Key Serviceability Limits
- Stressed Cash Flow: Stressed monthly repayments (plus basic living costs and other debt repayments) must fit within your net income after tax, typically limited by a 35% net cash commitment cap.
- Debt-to-Income (DTI) Limit: Banks cap maximum loan approval size at 6.0x gross household annual income to mitigate systemic defaults.
Action Plan: Maximize Borrowing Power
- Pay Off Small Debts: Car loans and credit card limits drastically reduce borrowing power.
- Stress-Test Your Financials: Use our APRA Borrowing Capacity Stress-Test Calculator to estimate loan eligibility before consulting mortgage brokers.
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