Why APRA Will Not Drop the 3% Serviceability Buffer

Key takeaways

• The buffer reduces borrowing capacity by roughly 25%.
• It is not only a rate-rise buffer - it covers income and expense shocks.
• Lowering it would increase borrowing capacity and likely prices.
• A modified assessment is permitted for like-for-like refinances.

What the buffer costs a borrower

Assessed at 9.5% rather than 6.5%, a given income supports roughly 25% less debt. On a household that could service $800,000 at the actual rate, capacity falls to about $600,000.

That gap is the buffer's entire purpose - and it is also why it is politically contested.

The case for keeping it

• Rates can rise further - and did, three times in 2026.
• Income is not guaranteed across a 30-year term.
• Living costs rise, compressing the surplus the assessment assumed.
• Lower buffers increase borrowing capacity, which tends to flow into prices rather than affordability.

The counter-argument

Critics point out that the buffer creates mortgage prisoners - borrowers meeting their repayments who cannot refinance to a cheaper loan because they fail another lender's buffered test.

APRA's response has been to permit a modified assessment for like-for-like refinances where debt is not increasing, rather than lowering the buffer generally. That is a lender-by-lender policy choice, not an automatic entitlement.

Frequently asked questions

Has the buffer always been 3%?

No. It has moved over time - it was 2.5 percentage points before being raised to 3.0. It is a policy setting APRA reviews rather than a fixed rule.

Does it apply to every lender?

It applies to APRA-regulated lenders. Non-bank lenders are not directly subject to it, though most apply a similar buffer, and APRA monitors spillover.

Will it come down?

APRA reviews settings against financial stability conditions. Public statements have emphasised the risks the buffer covers rather than signalling a reduction.

Related reading

• Stress-Testing Your Own Budget at +3%
• Mortgage Prisoners: When You Cannot Refinance
• APRA's DTI Cap Explained: The 20% Rule That Started February 2026

Sources

• Prudential Practice Guide APG 223 — APRA
• Macroprudential policy settings — APRA