Been Told No by Your Bank?

Why More Borrowers Are Getting Approved Outside the Usual Rules

Being told you don’t meet a lender’s borrowing rules can be crushing. Especially if you’ve always paid your mortgage on time, or you know your income is about to go back up.

But a “no” from one lender isn’t always the final answer. New figures from the banking regulator show that more borrowers are being approved even though they fall outside a lender’s standard rules.

In this article, I’ll explain what’s happening, what lenders mean by “serviceability”, who these exceptions can help, and what you can do to improve your chances.

What the latest figures show

The Australian Prudential Regulation Authority (APRA) is the regulator that sets the rules for banks. Each quarter, it publishes data on the home loans banks are writing.

Its latest figures show that 5.8% of new home loans funded in the June quarter of 2026 were approved as exceptions to the lender’s standard serviceability policy. That’s about $11.6 billion worth of loans in just three months.

It’s also the highest share since APRA’s current data series began in 2019. For comparison:

• In the March quarter of 2026, exceptions made up 5.1% of new loans.
• At the end of 2024, they made up 4.6%.
• Before late 2023, they typically sat at around 2% to 3%.

In other words, banks are using exceptions far more often than they used to.

What is serviceability?

Serviceability is a lender’s test of whether you can afford your home loan repayments, now and in the future.

To do this, lenders look at your income, your living expenses, and your other debts, such as car loans and credit cards. Then they work out whether you’d still have enough left over to cover your repayments.

Lenders also add a buffer. APRA expects banks to check that you could still afford your loan if interest rates rose by 3 percentage points. APRA kept this buffer at 3% when it last reviewed it in May 2026.

Here’s what that looks like in practice. Say you want a $550,000 loan at 6.3% over 30 years. Your actual repayment would be about $3,400 a month. But the lender will test whether you could afford it at 9.3%, which is about $4,545 a month. If your budget can’t stretch to that higher figure, you may not pass, even though you could easily afford the real repayment.

What is a serviceability exception?

APRA’s rules allow banks some flexibility. A bank can approve a loan that doesn’t meet its standard serviceability test, as long as it’s satisfied the borrower can still afford it. These are called exceptions to policy.

Banks must manage exceptions carefully and keep them limited. APRA monitors them closely. But they exist for good reason. A strict formula doesn’t always capture a person’s real situation.

Who can exceptions help?

Every lender has its own approach, but exceptions may help in situations like these:

Refinancers with a strong repayment history. Some borrowers get stuck with their current lender because rates have risen and they no longer pass the buffer test elsewhere. This is sometimes called “mortgage prison”. APRA has said banks can consider a borrower’s past repayment record when they refinance. If you’ve made every repayment on time and you’re moving to a loan with lower repayments, some lenders may approve you even if you fall short of the usual test.

People with a temporary drop in income. For example, someone on parental leave who has a confirmed return-to-work date, or a worker between contracts with a strong track record.

Self-employed borrowers. Business income can go up and down, and standard rules don’t always reflect a strong business accurately. Some lenders look more closely at the bigger picture.

People whose income has recently increased. A new job, promotion or pay rise may not yet show up in the documents a lender would normally use.

Borrowers with strong assets or savings. Large savings or low debt elsewhere can show you have the ability to manage repayments.

It’s not just about exceptions

There’s another reason a “no” isn’t always final. Lenders have very different policies to start with.

One lender might only count part of your overtime or bonus income. Another might count all of it. One might assess your living expenses one way, while another uses a different method. Some non-bank and specialist lenders also have more flexible rules for borrowers in less common situations.

That’s why being declined by your own bank doesn’t mean every lender will say the same thing. I work with more than 60 lenders, and their policies differ a lot.

What lenders still need to see

An exception isn’t a free pass. Lenders still need solid evidence that you can repay the loan. Depending on your situation, that might include:

• Bank statements showing your repayment history.
• Payslips, an employment contract or a letter confirming a return-to-work date.
• Tax returns and financial statements if you’re self-employed.
• Details of your savings and other assets.
• A clear explanation of why your situation is different.

It’s also worth remembering that a loan approved through an exception still needs to be affordable for you. The goal is a loan you can comfortably manage, not just one you can get approved for.

How to improve your chances

Whether you’re applying through standard rules or looking at an exception, these steps can help:

1. Reduce your credit card limits. Lenders count the full limit as debt, even if you don’t use it.
2. Pay down or close small debts. Personal loans and buy now, pay later accounts all affect your borrowing power.
3. Keep a clean repayment record. On-time repayments on your current loan are one of your strongest assets.
4. Get your paperwork in order. Clear, complete documents make it easier for a lender to say yes.
5. Check your credit score. Errors on your credit file can hurt your application. You can use my checklists and credit score checker to get started.

You can also get a quick estimate of where you stand with my borrowing power calculator.

Thinking of refinancing?

If you feel stuck with your current lender, it’s worth getting a proper review. Even if you didn’t pass another lender’s test in the past, policies change, and your situation may have changed too. My guide to the refinancing process explains each step. And if you’re self-employed, my self-employed home loans page covers the options available to you.

How I can help

At Awesome Lending Solutions, I look at your whole situation, not just a formula. I’ll compare policies across more than 60 lenders, explain which ones may suit you, and be upfront if I don’t think a loan is right for you.

Been told no by your bank? That’s not always the final answer. Let’s have a chat about what might be possible. Call me on 02 7904 9560 or book a free appointment to discuss your borrowing situation.