Serviceability, as of December 2025, refers to a lender’s assessment of a potential borrower’s ability to repay a loan, taking into account their income, expenses, and existing debts. It’s a crucial factor for investors seeking finance in Victoria, and increasingly stringent criteria are being applied.
Currently in Melbourne, lenders are heavily focused on ‘stress testing’ borrowers. This means assessing whether repayments remain manageable if interest rates were to rise significantly – currently, lenders are generally using a buffer of around 3-4% *above* the current loan rate. This impacts the amount investors can borrow. In the Eastern Suburbs, where property values are typically higher, this can be particularly relevant. We’re seeing buyers needing to demonstrate a stronger financial position than in previous years. Lenders also scrutinise rental income, often applying a conservative discount (typically 20-30%) when calculating income from an investment property. This is to account for potential vacancy periods and maintenance costs. As of December 2025, many lenders also require evidence of a healthy deposit – generally at least 20% of the property value – and a good credit history. The process can be complex, and buyers are often advised to seek pre-approval to understand their borrowing capacity before actively searching for a property. In 2026, we anticipate continued focus on responsible lending practices.
Understanding serviceability is vital for investors navigating the Victorian property market, as it directly influences their purchasing power and financial planning.