If you’ve been trying to figure out how to increase your borrowing power in Sydney lately, you’re not alone. After three consecutive RBA rate hikes earlier this year pushing the cash rate back up to 4.35%, a lot of buyers and investors have found themselves staring at a borrowing capacity that looks nothing like what they were quoted 12 months ago.
The numbers are confronting. According to recent data, the average single income earner has lost around $35,400 in borrowing capacity since January 2026. For a couple on combined incomes, that figure jumps to roughly $70,700. In a city where the median house price is still well above $1 million, that gap matters enormously.
But here’s the thing — the rate environment doesn’t tell the whole story. How much you can borrow depends on far more than the RBA’s cash rate. And in many cases, there’s genuine room to move.
Why Borrowing Power Has Dropped So Sharply
Every lender uses a serviceability buffer when assessing your loan. Under APRA guidelines, they stress-test your repayments at your actual rate plus 3%. So if you’re borrowing at 6.2%, the bank is checking whether you could handle 9.2%. That buffer bites hard when base rates are already elevated.
Add to that rising living expenses — lenders use household expenditure models (HEM) that have tracked upward with inflation — and you can see why the same income that got you approved for $950k a couple of years ago might now produce an $820k approval.
The good news? Most of the factors that affect borrowing capacity are within your control, at least partially. Here’s where to focus.
1. Clean Up Liabilities Before You Apply
Lenders look at your total credit exposure, not just your mortgage. A $10,000 credit card limit reduces your borrowing power by roughly $45,000–$55,000, even if you clear the balance every month. Same deal with car loans, personal loans, and buy-now-pay-later accounts.
Before you apply, go through every credit facility you hold and close what you don’t need. Cancel unused credit cards. Pay down or clear any short-term debt. Don’t do it the week before you apply — lenders like to see at least 30–60 days of clean statements. But if you’ve got 3–4 months before you plan to buy, this is probably the single highest-return action you can take.
2. Review Your Living Expense Declarations
Banks now scrutinise declared living expenses much more carefully than they did pre-2020. But that doesn’t mean you should inflate them out of anxiety. Be accurate. If you’ve genuinely cut back on dining out, subscriptions, or discretionary spending over the past year, make sure your declaration reflects that.
Some borrowers overclaim expenses because they assume the bank wants conservatism. In reality, unsupported over-declarations can reduce your borrowing capacity without any corresponding benefit. Your broker can help you work through what’s genuinely required to declare versus what’s a one-off.
3. Consider a Different Lender — Not All Buffers Are Equal
The big four banks aren’t your only option. Some smaller banks and non-bank lenders apply a lower serviceability buffer — in some cases as low as 1–2% above the actual rate instead of the standard 3%. That can meaningfully change what you can borrow.
There’s nuance here: lower-buffer lenders sometimes charge slightly higher rates, and they may have tighter criteria in other areas. But depending on your situation — particularly if your income is stable and your financial position is clean — the tradeoff can absolutely make sense. This is exactly where a good broker earns their keep. They know which lenders will treat your application most favourably.
4. Structure Your Income Correctly
If you’re self-employed, a contractor, or earn commissions or bonuses, how you present income to a lender is everything. Banks typically want two years of tax returns for self-employed borrowers, and they’ll often average the two years — which can drag you down if last year was stronger.
Some lenders allow accountant declarations or alt-doc products that assess income differently. Others are more flexible about how they treat overtime or secondary income streams. Getting this right before you apply — rather than after a decline — is critical. A declined application can affect your credit score and your ability to reapply.
5. Time It Strategically
Rate cuts are now not widely expected until 2027, but the market has a habit of moving faster than forecasts. Every 0.25% cut in the cash rate translates to roughly 2–3% more borrowing capacity. For a buyer eyeing a $900,000 property in Parramatta or a unit in Chatswood, that could be the difference between approval and a shortfall.
If your timeline is flexible, it’s worth mapping out what cuts to rates would mean for your actual borrowing power — and whether it makes more sense to act now in a softer market or wait for capacity to recover. There’s no universally right answer, but you should at least be making the decision with clear numbers in front of you.
The Sydney-Specific Reality
Sydney’s market is doing something interesting right now. Upper-quartile properties — think $2M+ houses in the Inner West or Lower North Shore — have been declining for several months. But more affordable units in areas like Homebush, Rockdale, or Penrith are showing resilience, partly because the buyer pool at that price point is larger and partly because rental yields have held up.
For first home buyers, this creates a real window. You’re buying into a softer upper market while your own segment remains competitive — but it’s not chaotic. Combined with the federal government’s Home Guarantee Scheme (which is still running in 2026 with 5% deposit options), there are genuine pathways for buyers who structure things correctly.
Get a Proper Borrowing Power Assessment
The single biggest mistake Sydney buyers make right now is assuming the number their bank app gives them is the final word. It isn’t. Every lender calculates borrowing capacity slightly differently, and the gap between the most and least generous can run to $100,000 or more on the same application.
If you haven’t had a formal borrowing power assessment done with a broker who compares across lenders, that should be your first step — especially before you start making offers. Knowing your real ceiling changes how you approach the market entirely.
At Loan Connect, we work with buyers and investors across Sydney every week on exactly this. If you want a straight answer on what you can borrow — and what you can do to push that number higher — get in touch with our team.
