It’s been a busy year on the money front.
We’ve seen tax cuts, rate cuts, and reductions in HECS debts which have all been positives for our financial wellbeing.
But that’s not all that’s improved.
There’s a decent chance these factors have helped to boost your borrowing power, which makes now a good time to revisit your borrowing capacity.
What shapes your borrowing power?
Your borrowing power, or as lenders like to call it – your borrowing capacity – is the amount a lender will let you borrow to buy a home.
Each lender has their own way of calculating borrowing power.
But it mainly boils down to three things: your income, your household expenses, and any other debts that will continue after you have secured a home loan.
As we have talked about before, your borrowing power isn’t set in stone.
It can change over time, and recent months have seen several events that are likely to have increased your borrowing capacity.
Here are 4 reasons why your borrowing power could have increased.
1. Interest rates have fallen
Two official rate cuts this year have helped to lower home loan interest rates.
Lower rates mean lower monthly home loan repayments, which flows through to higher borrowing power.
How much higher?
Reach out to our team to find out.
2. Tax cuts have kicked in
A year ago we were celebrating the arrival of Stage 3 tax cuts that put money back in our hip pockets.
Tax cuts can have another happy side effect.
Paying less tax can mean more after-tax income, which also leads to increased borrowing power.
3. Wages are up
Around 2.9 million Australians received a pay rise from the start of July thanks to a 3.5% increase in the National Minimum Wage and award wages.
Even if you’re not covered by these wage rises, your boss may have agreed to give you a pay rise from 1 July.
Or a new job could see you earning more.
Talk to us to know how a bigger pay packet may have impacted your borrowing power.
4. Some lenders are treating HECS-HELP debts differently (in certain circumstances)
In the past, lenders have typically included student debt – that’s HECS-HELP loans – in their loan serviceability calculations. This can significantly impact your borrowing capacity if your income is strong.
However, in 2025, lenders have been given the flexibility to consider the treatment HELP liabilities a little bit differently in specific situations, which may help to boost your capacity.
Steps you can take to potentially lift your borrowing power even further:
- Reduce regular expenses: lenders take household expenses into account when deciding how much you can borrow. Trimming back a few regular bills can make a difference to your borrowing power. Consider cutting back subscriptions for apps and streaming services you’re not using and shop around for cheaper energy and phone plans.
- Cut your credit card limit: lenders assess your borrowing capacity based on your card’s credit limit, not the outstanding balance. If you’re not keen on cancelling a card altogether, consider contacting the card issuer to lower the credit limit. If you want to know how much of a difference cancelling your card would make before you cancel it, talk to us first. We can run the numbers for you first to confirm how much of a difference it makes – so you can decide to reduce the limit of cancel it completely.
- Keep a lid on other debts: the more you can cut back other debts like personal loans or car loans, the higher your borrowing power can be. Sure, it’s not easy paying down debt. But keep your eyes on the prize – it could take you closer to buying your first, or next, home.
Know your numbers
And of course, just because you can borrow more, it doesn’t mean you should borrow more. It’s important you only borrow as much as you feel comfortable borrowing, so you can stay on top of your repayments and continue living the type of lifestyle you want to live.
If you’re keen to understand your current borrowing capacity, reach out to our team today.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
