Why It's Tough for Investors Right Now and how they can be prepared for later

But It's Not All Bad News

Even with rates and rules working against investors, there still aren't enough homes being built to meet demand, and cities like Perth, Brisbane and Adelaide are still doing okay price-wise, even while Sydney and Melbourne cool down a bit. Good news too — lenders like Pepper Money, Liberty and Resimac aren't banks, so they don't have to follow APRA's new borrowing cap, which gives investors another way to get finance. And if you're buying a brand new build, that type of loan is completely exempt from the new rule.

How Much Can You Actually Borrow?

Working out your borrowing power comes down to two tests, and whichever one gives you the lower number is what you're stuck with — the affordability test (where banks pretend rates are around 9%) or the new borrowing limit (roughly 6 times your income).

Here's what that looks like in real numbers. Someone earning $100,000 with no other debts buying their first investment property could technically borrow up to $600,000 under the 6-times-income rule, but the affordability test usually brings that down to somewhere between $450,000 and $540,000. If that same person earned $120,000 instead, the income-based limit goes up to $720,000, but realistically they'd probably be approved for $560,000 to $640,000 once the bank does its affordability check.

A couple earning $200,000 combined, with one kid and no other debt, could theoretically borrow $1.2 million, but in practice the bank will likely cap them around $900,000 to $1 million. And a couple on $150,000 combined might see a limit of $900,000 on paper, but end up approved for closer to $780,000–$850,000.

It's a different story for people who already own investment property. Take someone earning $180,000 who already has $1.22 million in debt — they're already borrowing at nearly 7 times their income, which puts them over the new limit. Getting approved now depends less on whether they can afford it, and more on whether their bank still has room left in its quota for high-borrowing loans. Similarly, someone with a $600,000 investment loan and $180,000 income might only be able to borrow another $250,000 to $420,000 more — not because they can't afford it, but because of the new borrowing cap.

So here's the bottom line: if you're buying your first investment property, the affordability test is probably what limits you. But if you already own a few properties, the new borrowing cap is more likely to be the thing holding you back. One tip that actually helps — cancelling unused credit cards can make a real difference, since banks count your card's full limit (not what you owe) against you. Cancelling $10,000 of unused limit can free up around $50,000 in borrowing power.

Not All Lenders Play by the Same Rules

Here's something a lot of investors don't realize — different lenders have different amounts of "room" left to approve high-borrowing loans, and that changes depending on the bank and the time of year.

Big banks have to follow APRA's rule strictly, only allowing 20% of their new loans to go to high-borrowing customers, and this quota resets every three months (January, April, July, October). If a bank has already used up its quota for the quarter, even a strong application can get knocked back or delayed. Smaller lenders like Pepper Money, Liberty, Resimac, Firstmac and La Trobe Financial don't have to follow this rule at all, and they'll often approve borrowing levels of 6.5 to 7.5 times income — usually for a slightly higher interest rate.

If you're building a new property rather than buying an existing one, that loan is exempt from the cap entirely, which is a smart option if you're close to your limit. Bridging loans for your own home are exempt too, which helps if you're upgrading while still holding investment debt. If you're borrowing through a trust or company, it pays to get your paperwork tidy — messy structures can accidentally make your borrowing look higher than it really is.

A smart move before applying: ask us which banks still have room left in their quota this quarter, and get a comparison with a non-bank lender at the same time, rather than waiting to get knocked back first.

What You Can Do Now to Get Ready

• Find out exactly where you stand — get your borrowing power checked properly instead of guessing.

• Look into non-bank lenders and new-build loans while the banks are being extra cautious. We can get the first 2 done for you with no cost to you.

• Tidy up your finances — closing unused credit cards and consolidating debt can boost how much you're approved for.

• Work with us who knows which lenders still have room to lend, since this changes every few months.

• Keep an eye on the tax changes — the final details will matter more than the headlines.

Markets that go through a rough patch don't stay that way forever. Not long ago, experts were predicting rate cuts before this year's inflation surprise changed the picture. The investors who spend this time getting their finances in order — rather than just waiting around — will be the ones ready to jump when things ease up.

Tanuj Kapoor | Mortgage Broker | Jabsons Finance

Ex-Senior Manager QA & Automation | MBA | B.E. (Comp Sci)

Tanuj Kapoor is a credit representative (557159) of BLSSA Pty Ltd ACN 117 651 760 | Australian Credit Licence 391237.

Disclaimer: The information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. It is not personal advice, credit advice, tax advice or legal advice, and is not a recommendation to enter into, refinance, or remain in any particular credit contract. Any figures, calculations, or projections shown are simplified examples for illustration only — they are not guarantees or forecasts, and actual outcomes will vary based on your circumstances and the lender's assessment. Before acting on any information here, you should consider whether it's appropriate for you and seek advice from a licensed mortgage broker, financial adviser, tax adviser, and/or solicitor. Lending policies, interest rates, and tax laws change over time and vary between lenders and states — always confirm current details before making a decision.