A new study commissioned by the Finance Brokers Association of Australia (FBAA) has found that a modest adjustment to the mortgage serviceability buffer could significantly boost borrowing power and improve access to the property market for hundreds of thousands of Australians.
The research, conducted by global firm CoreData, suggests that reducing the serviceability buffer from the current 3% to 2.5% could increase national borrowing capacity by a staggering $276 billion. This change could potentially allow an additional 270,000 people to qualify for a median-priced home loan. Notably, younger buyers—particularly those aged 25 to 34 using a 5% deposit for homes under $900,000—stand to benefit the most.
FBAA managing director Peter White said this simple adjustment could have a profound impact. “We’ve long maintained that tweaking the buffer could dramatically change the game for aspiring homeowners who are already capable of meeting repayments,” he said.
The serviceability buffer, set by the Australian Prudential Regulation Authority (APRA), requires lenders to assess whether a borrower can afford their loan repayments at an interest rate 3% higher than the actual rate. This conservative approach has come under fire in the current high-rate environment, with critics arguing it unnecessarily locks out would-be homeowners and refinancers.
White urged both major political parties to adopt a pre-election pledge to revise the buffer, noting the Coalition has already signalled support. He argued that the policy change could help so-called “mortgage prisoners”—homeowners stuck in higher-rate loans who cannot refinance due to the strict buffer.
The report also highlighted potential benefits for existing borrowers, with a lower buffer possibly reducing loan stress and enabling more people to refinance and avoid financial strain.
While the FBAA acknowledged that loosening the buffer could put upward pressure on property values, White said that dynamic was already in motion due to existing supply and demand factors. “Ultimately, helping more people into homeownership—and keeping them there—has to be the priority,” he said.
Lowering the buffer, White added, would also relieve pressure on the rental market. “More people able to buy means less strain on rental availability, and it also prevents existing homeowners from being forced back into renting because they can’t refinance,” he said.
The FBAA has shared its findings with both the government and the opposition, pushing for not just a one-off change, but regular reviews of the serviceability buffer to ensure it reflects current economic conditions.
Source: FBAA & CoreData research findings, 2025.
