Borrowing Power
The six times income cap, and why your limit is lower than the calculator says
6 min read · By Daniel Lagden · 23 August 2026
Your borrowing limit is often set by a debt to income cap rather than by what you can technically afford. Most lenders now apply a ceiling of around six times gross income, so even where a serviceability calculation says you could service more, the cap is what decides the answer. It is the single most common reason a real approval comes back lower than an online estimate.
Quick summary: there are two separate tests, and you must pass both. Serviceability asks whether you can afford repayments at an assessment rate well above the actual rate. The debt to income cap asks whether your total debt is a reasonable multiple of your income, regardless of affordability. Whichever test bites first sets your limit.
What is a debt to income ratio?
It is your total debt divided by your gross annual income. Total debt means everything, not just the new loan: existing mortgages, credit card limits whether drawn or not, car and personal loans, and any other facilities. On an income of $120,000, a six times cap points to a total debt ceiling near $720,000, and any debt you already carry comes off that figure before the new loan is considered.
Why do lenders apply a cap at all?
Because affordability today is not the same as resilience later. A borrower can service a very large loan while rates are low and still be badly exposed if circumstances change. Prudential limits require banks to keep high ratio lending to a modest share of what they write each year, which means such loans are rationed rather than banned. That rationing is why a strong file can still be declined on ratio alone, and why the same file can succeed elsewhere.
Why is my assessed rate so much higher than the rate I would pay?
Lenders must add a buffer to the actual rate when testing whether you can afford repayments. As at August 2026 the prudential buffer remains three percentage points, so the assessment rate sits well above what you would actually be charged. It is a stress test, not a forecast. Understanding this stops the gap between the advertised rate and the assessed rate feeling arbitrary.
What can you actually do about it?
- Reduce or close undrawn credit card and overdraft limits, because the limit counts even when the balance is nil.
- Clear small consumer debts before applying, since each one consumes ratio and serviceability at once.
- Time your application around income that is documented and stable, rather than income you expect to earn.
- Understand that a larger deposit lowers the loan, which lowers the ratio, which is often the fastest lever available.
- Match the file to a lender whose policy and appetite suit it, because the cap is applied with different overlays across the market.
Prudential settings described here are current as at August 2026 and can change. Individual lender policy varies and is applied case by case.
Run the numbers
Frequently asked questions
Does an unused credit card really reduce how much I can borrow?
Yes. Lenders generally count the full limit, not the balance, because you could draw it at any time. Reducing or closing unused limits before applying is one of the simplest ways to improve your position.
Can any lender go above six times income?
Some lending above that level is permitted, but it is limited to a modest share of what each lender writes, so it is rationed and usually reserved for very strong files. It is not something to count on.
Why did an online calculator give me a much bigger number?
Most public calculators model affordability only. They rarely apply the debt to income cap, the buffer, expense benchmarks or lender specific overlays, which is why the real figure is often lower.
Get a realistic number before you shop
Knowing your genuine ceiling, and which test is setting it, is what stops wasted applications and lost deposits. We model your position against real lender policy so the number you take to an agent is one you can rely on.
Check my borrowing positionGeneral information only. This article does not take your personal circumstances into account and is not credit advice.
