Understanding Your Borrowing Power in 2026

Understanding Your Borrowing Power in 2026

As the Australian property market continues to evolve, understanding your borrowing power is essential for anyone considering buying a home or investment property. As we move into 2026, various factors can influence how much you may be eligible to borrow. In this blog post, we will explore these factors, offering practical advice to help you navigate the lending landscape.

What is Borrowing Power?

Borrowing power refers to the amount of money a lender may be willing to lend you based on your financial situation. Several elements are taken into account, including:

• **Income**: Your regular income sources, including salary, bonuses, rental income, and any other earnings.
• **Expenses**: Monthly obligations such as bills, living expenses, and existing debts.
• **Credit History**: Your credit score and past borrowing behaviour.
• **Deposit**: The amount of savings you can provide as a deposit, which can significantly impact your borrowing power.

Factors Influencing Borrowing Power in 2026

1. Interest Rates

As of 2026, the Reserve Bank of Australia (RBA) may continue to adjust interest rates in response to inflation and economic conditions. Higher interest rates generally reduce your borrowing power because they increase the cost of repayments. Conversely, lower rates can enhance your borrowing capacity.

2. Regulatory Changes

In recent years, the Australian Prudential Regulation Authority (APRA) has implemented various regulations to ensure responsible lending practices. These regulations may continue to evolve, affecting how lenders assess borrowers. Be aware of:

• **Serviceability Calculators**: Lenders use these calculators to determine if you can comfortably afford loan repayments based on your income and expenses.
• **Loan-to-Value Ratio (LVR)**: This ratio assesses the proportion of the property value that you wish to borrow. A lower LVR often leads to better borrowing conditions.

3. Economic Conditions

The broader economic climate, including employment rates and wage growth, can significantly impact your borrowing power. Strong economic growth may lead lenders to be more lenient, while economic downturns could tighten lending criteria.

4. Personal Financial Health

Maintaining a healthy financial profile is crucial. To improve your borrowing power:

• **Reduce Debt**: Pay down existing loans and credit card balances to improve your debt-to-income ratio.
• **Increase Savings**: Aim to save a larger deposit, which can enhance your LVR and make you a more attractive borrower.
• **Manage Credit Wisely**: Regularly review your credit report and ensure your credit history remains positive.

What You Can Do to Enhance Your Borrowing Power

Here are some actionable steps you can take:

Conduct a Financial Review

• Assess your current financial situation, including income, expenses, and debts.
• Create a budget to help manage your finances effectively.

Consult a Mortgage Broker

Engaging with a qualified mortgage broker, such as Timothy Yang at Northmark Finance, can provide valuable insights tailored to your unique situation. They can help you understand your borrowing power and navigate the lending landscape.

Consider Government Grants and Schemes

Depending on your circumstances, you may be eligible for various government grants and schemes, such as:

• **First Home Owner Grant (FHOG)**: Available in most Australian states, providing financial assistance for eligible first-home buyers.
• **HomeBuilder Scheme**: This initiative may provide financial support for building or renovating homes.

FAQs

What is the best way to calculate my borrowing power?

A good starting point is to use online borrowing power calculators available on many lender websites. However, these calculators provide only indicative estimates. For a more accurate assessment, consult with a mortgage broker who can take into account your individual financial situation and current market conditions.

Conclusion

Understanding your borrowing power in 2026 is crucial for making informed decisions in today’s dynamic property market. By staying informed about the factors influencing your eligibility and taking steps to enhance your financial profile, you may be well-positioned to secure the financing you need.

If you are considering purchasing a home or investment property, we encourage you to speak with Timothy Yang at Northmark Finance for personalised advice tailored to your specific needs.

*Disclaimer: This information is for general information only and should not be considered financial advice. Always consult with a qualified professional for personalised advice.*