Two people with identical incomes can get very different borrowing outcomes — serviceability assessment is why, and it's worth understanding the shape of it even if the exact formula stays with the lender.
It starts with assessed income, not just gross income
Lenders typically apply 'shading' to certain income types — overtime, bonuses, rental income and casual earnings are often counted at a reduced percentage, on the assumption they're less reliable than a stable salary.
Expenses are benchmarked, not just self-reported
Rather than taking your stated living expenses at face value, lenders compare them against a benchmark (often based on household size and location) and use whichever figure is higher. This is one reason two borrowers with similar income can get different results.
A buffer rate is applied to test affordability
Lenders test whether you could still service the loan if repayments were higher than they are today, adding a buffer to whatever rate applies. This is a regulatory requirement designed to build in a margin of safety, not a reflection of where any particular rate is expected to go.
Chris Brown
Managing Director & Finance Broker at New Vision Financial Services, a credit representative under Australian Credit Licence 384704 and a member of the FBAA and AFCA. More about Chris →
Frequently asked
Why did my borrowing power come back lower than I expected?
Often it's a combination of income shading, expense benchmarking, and existing debt limits (like credit cards) being counted at their full limit rather than your current balance.
Does closing a credit card increase my borrowing power?
It can, since unused credit limits are usually counted as a commitment regardless of the balance. Reducing limits on cards you don't need is a common, practical step before applying.
Do all lenders calculate serviceability the same way?
No — assumptions around income shading, expense benchmarks and buffers vary between lenders, which is part of why comparing across a panel can produce a meaningfully different result.