What is the 3% serviceability buffer?

It's a stress test. The bank checks whether you could still afford your repayments if interest rates rose 3% above your actual rate. You never pay that rate, it's only used to decide how much you can borrow.

Do all lenders use a 3% buffer?

No. The big banks generally use 3%. Some smaller, non-bank lenders use 2% on new loans, and some refinance pathways assess at 1%, each with their own conditions.

Can I get a 1% buffer on a new purchase?

Generally not. The 1% buffer pathways are mostly for refinancing an existing loan you've been paying well, usually owner occupied and at or under 80% LVR.

What is a floor rate in serviceability?

A minimum rate a lender uses to assess you. The lender uses whichever is higher, your rate plus the buffer or the floor, and floors vary from lender to lender.

Does a lower buffer mean I can borrow more?

It can, because your repayments are tested at a lower rate. But check the rate, floor and product trade-offs, and make sure you'd be comfortable if rates went up.

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Straight Answers · Bank said no

What is this 3% interest rate buffer, and why am I being assessed on a rate I'll probably never see?

Bayley Clarke · Mortgage broker on the road · Last checked 16 October 2026 · 4 min read

The short answer

Rules are rules. The 3% buffer is a stress test: the bank checks you could still afford the loan if interest rates went up another 3% from where they are today.

Not every lender uses 3%. Some smaller lenders use 2% on new loans, and a handful of refinance pathways assess at 1%. A lower buffer changes how much you can borrow, so if 3% is what's capping you, it's worth looking at the alternatives.

The 60 second version, filmed from the driver's seat. The rest of this page is the detail underneath it.

What the buffer actually does

When a bank works out how much you can borrow, it doesn't test your budget at the rate you'll actually pay. It adds a buffer on top, generally 3%, and asks whether you could still make the repayments at that higher rate on top of your living expenses and other debts.

It's designed to stress test your financial world in the event interest rates go up. The bank wants to know that if rates rise again, you're not the one who can't keep up. It all happens in the background. You never pay the buffered rate. It's only used to decide how much the bank is willing to lend you.

Most lenders also have a floor, a minimum assessment rate, and use whichever is higher: your rate plus the buffer, or the floor. Floors vary a fair bit from lender to lender, which is another reason two banks can give you two different borrowing numbers.

Not every lender uses 3%

The big banks generally work to the 3% buffer, because that's what the banking regulator expects of them. But not all lenders do. A group of smaller, non-bank lenders assess new loans at a 2% buffer. That one percentage point can make a real difference to how much you can borrow, especially if you're close to the line.

There's also a 1% buffer, but it's narrower than it sounds. It shows up in refinance pathways at several lenders, for people who already have a loan, have been paying it well, and generally sit at or under 80% LVR, usually owner occupied. It's built for someone who'd pass easily on their existing repayments but gets stuck at 3% when they try to switch.

One lender has gone further on its five year fixed loans and assesses them at the actual rate with no buffer at all. Every one of these has its own conditions, so it comes down to your situation.

If 3% is what's capping you

If you're getting capped out because your bank is buffering your rate at 3%, ask what the alternatives look like. A 2% lender for a purchase, or a 1% refinance pathway if you're switching an existing loan, might change the picture for you.

The trade-off is worth checking. A lender with a lower buffer might have a higher rate, a higher floor, or a narrower set of products. The goal isn't the biggest number on paper, it's a loan you can actually afford that does what you need.

The honest bit: the buffer is there for a reason

The rate rises this year are exactly what the buffer is designed for. People who borrowed with a buffer behind them had room to absorb it. Getting a bigger approval from a lender with a smaller buffer is only a good outcome if you'd genuinely be fine at a higher rate.

So the question isn't just how much can I borrow. It's how much would I be comfortable repaying if rates went up again.

Want to know if a different buffer changes your number?

A 30 minute call. I run your borrowing capacity across lenders with different buffers and floors, and tell you straight whether the extra room is worth taking.

Book a 30 minute call Call 0437 189 939

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Next question

Why does the bank ignore my actual budget?

Banks use HEM, the Household Expenditure Measure, a benchmark of average household spending.