In 2019, APRA indicated to banks that, in assessing loan applications, it expected them to apply a ‘serviceability buffer’ of at least 2.5 percentage points. In October 2021, they increased this to a minimum of 3 percentage points. As a result, many borrowers should have some spare servicing capacity built into their financial margins.
Finally, the household sector as a whole has accumulated sizeable equity via higher housing prices over recent years. Rising housing prices have benefited borrowers with existing mortgages. Furthermore, the share of new borrowers that have borrowed at high loan-to-valuation ratios (LVR >  90) has declined markedly.