How the new 3% mortgage stress test will affect property buyers from 1st November 2021

New lending rules are about to kick in, which will limit the amount people can borrow from the bank.

From Monday 1st November, banks must make sure new home loan applicants can repay their mortgage if rates rise by 3 percent.

The current ‘stress test’ is 2.5 percent above current rates.

APRA, the government regulator imposing the rule, has said this will reduce people’s maximum borrowing capacity by approximately 5 percent.

What will happen to people with pre-approval or those waiting on their mortgage to settle?

The big four banks have said loans with unconditional approval that have not yet settled will still be processed using the old 2.5 percent serviceability test.

The big banks will also assess customers with pre-approval who have not yet bought a property using the old stress test, provided they buy and make a full loan application within 90 days in the case of CBA, Westpac, and NAB and 120 days for ANZ.

To be on the safe side, customers yet to buy should check in with their bank before making an offer on a home, particularly if their circumstances have changed.

What impact the new 3% mortgage stress test will have on borrowers

Analysis fromRateCity.com.aushows for a family of four with an annual household income of $150,000, their maximum home loan borrowing power could decrease by an estimated $46,900.

For a single person on an annual income of $100,000, the maximum they can borrow could drop by an estimated $50,400 under the new increased mortgage stress test.

These calculations are based on CBA’s serviceability calculator on a fixed-rate loan. Note: base variable customers may be able to borrow more. See full assumptions below.

Impact on a family of 4 looking to take out a home loan

Household income

Current borrowing capacity

New max borrowing capacity























Impact on a single person taking out a home loan

Single income

Current borrowing capacity

New max borrowing capacity



















Notes: Calculations are based on CBA’s serviceability calculator for a borrower taking out a fixed-rate owner-occupier loan paying principal and interest with a revert rate of 3.85%.
Household income assumes one adult working full-time and one adult working part-time earning half the wage with two dependent children and no other debts.
Minimum household expenditure is applied, depending on income.

Why has APRA increased the serviceability buffer to 3%?

APRAhas increased the buffer in a bid to make sure people can meet their repayments when rates rise.

From Monday, banks will need to check if people can repay their loan at 3 percent more than their current interest rate, or the ‘floor’ rate set by the bank – whichever is higher.

RateCity.com.au research director, Sally Tindall, said:

"Anyone intending to bid at an auction in the next few months should call their bank to double-check how much they can borrow.

While the big banks have all said they’ll honour pre-approvals, if your circumstances have changed you might have to start from scratch under the new rules,” she said.

The last thing you want your new home loan to do is to fall short.

While buyers who aren’t borrowing at or near capacity are unlikely to be deterred, this new change could be the last straw for some first home buyers trying to stretch themselves to get into the market.

Although the new higher mortgage stress test may seem frustrating for some people, this move is designed to protect borrowers when rates will undoubtedly rise.

APRAconsiders loans with a debt-to-income ratio of six or higher to be risky, and already, 21.9 percent of new loans hit this benchmark in the June 2021 quarter.

If debt-to-income levels keep rising we’re likely to seeAPRAintervene with additional restrictions before the year is out,” she said.

Big four bank serviceability floor rates










How the big four banks are managing existing home loan applications:

Note: the scenarios below assume there are no material changes to the application. Material changes could trigger a re-start of the application.

Customers who have bought property, had their loans approved and are waiting for settlement.

Customers with pre-approval but have not yet bought a property.


Customers will still be assessed using 2.5% buffer.

Customer assessed at 2.5% provided it converts to a full application within 90 days.


Applications approved by Thursday 28 October 2021 are assessed using the previous buffer rate of 2.50%.

Customers who received approval in principle by 28 October will be assessed using the 2.5% buffer if they get full approval within 90 days.


Customers will still be assessed using 2.5% buffer.

Customer assessed at 2.5% as long as it converts to a full application within 90 days.


Customers will still be assessed using 2.5% buffer.

Customer assessed at 2.5% as long as it converts to a full application within 120 days.


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Jason Gwerder
Monday, 1 November 2021

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