In short: Most declines come down to four categories: serviceability, credit history, deposit or equity, and the property itself. Under APRA's 3 percentage point buffer, applicants in 2026 are assessed at roughly 9.25% to 9.5% rather than the rate they will actually pay, which is why many borrowers who can comfortably meet real repayments still fail the test.

Key takeaways

The serviceability buffer means you are assessed about 3 points above your actual rate.
From February 2026, APRA limits lending at a debt-to-income ratio of 6 or more to 20% of a lender's new lending — so a high-DTI application can be declined on timing alone.
Buy-now-pay-later accounts and undrawn credit card limits reduce borrowing capacity even when unused.
A decline at one lender is not a decline everywhere; policies differ substantially.

Serviceability and income

Fails the buffered assessment. Assessed near 9.25–9.5%, not your actual rate.
Debt-to-income too high. With APRA capping DTI ≥ 6 lending at 20% of new lending from February 2026, borrowers near that line compete for a restricted quota.
Income type not accepted. Casual, contract, gig and probationary income is assessed conservatively, and some lenders shade overtime and bonuses by 20% or more.
Existing commitments. Card limits are assessed at the full limit regardless of balance; HECS-HELP, novated leases and BNPL all reduce capacity.

Credit, deposit and property

Adverse credit history. Defaults, judgments and repeated late payments are visible through comprehensive credit reporting.
Too many recent enquiries. A cluster of applications reads as distress.
Insufficient genuine savings. Many lenders want to see 5% saved over three months; gifts and windfalls may not count.
Deposit does not cover costs. Stamp duty and fees are on top of the deposit.
Valuation short of contract price. Raises LVR and can breach policy.
Unacceptable security. Small apartments, serviced apartments, high-density postcodes, remote locations or non-standard construction.
Spending conduct. Statement reviews that show gambling, dishonoured payments or undisclosed debts.
Inconsistent documentation. Figures that do not reconcile across payslips, tax returns and statements.

What to do after a decline

Ask for the specific reason — under responsible lending obligations you are entitled to understand why. Then address the cause rather than immediately reapplying, since each new application adds another enquiry.

Capacity problem: close or reduce unused credit limits, clear small consumer debts, or consider a longer loan term.
Credit problem: obtain your file from Equifax, Experian and illion, correct errors and allow time to pass.
Policy problem: a different lender may simply say yes — this is where a broker earns their keep, and brokers wrote 76.7% of new residential loans in the December 2025 quarter.

Frequently asked questions

Does a declined application show on my credit file?

The enquiry appears, but the outcome does not. Other lenders can see that you applied and when, though not that you were declined — which is still enough for a cluster of enquiries to raise questions.

How long should I wait before reapplying?

Long enough to fix the underlying cause. For a capacity or conduct issue, three to six months of clean statements and reduced commitments materially improves the picture. Reapplying immediately to the same lender rarely changes the answer.

Will closing my credit cards increase my borrowing power?

Usually yes, because lenders assess the full approved limit rather than the balance owing. A $15,000 limit can reduce borrowing capacity by roughly $50,000 to $70,000 depending on the lender's calculator.

Related reading

Sources

Prudential Practice Guide APG 223 Residential Mortgage Lending — APRA
Responsible lending conduct, RG 209 — ASIC
Mortgage broker market share, December 2025 quarter — MFAA

Rates checked as at 2 August 2026. Interest rates, lender policies and government schemes change frequently. Figures in this article are illustrative and were accurate at the date shown.

General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not personal credit or financial advice. Consider whether it is appropriate for you and seek advice from a licensed credit representative before acting.

Any interest rate shown is an example only and is not an offer of credit. Where a rate is quoted, the applicable comparison rate is available from the relevant lender and should be considered alongside it.