A couple on the Sunshine Coast had confirmed they were eligible for the Australian Government’s 5% Deposit Scheme. First home, Australian citizens, owner-occupiers, a property under the price cap for their area, and a 5% deposit saved. They had done the reading. What they had not expected was the number their lender produced: a maximum loan about $20,000 short of what they needed for the house they had found.
Their first reading of that result was that the scheme had said no. It had not. The scheme had said yes to them as applicants. One lender’s serviceability calculator had said the loan was larger than its settings would support.
Two assessments, two parties
The scheme is administered by Housing Australia and delivered through a panel of participating lenders, which reached 57 when Bankwest joined on 2 November. Housing Australia sets the eligibility rules: who qualifies, what kind of property, what price cap applies, what deposit is required. That is one assessment.
Whether a particular lender will lend a particular amount to that eligible applicant is a different assessment, made by the lender using its own serviceability calculator. The scheme guarantee covers the portion of the loan above 80%, which is what removes the need for lenders mortgage insurance. It does not change how the lender tests income against expenses, and it does not loosen any of the lender’s own policy settings.
This is why the same couple can be fully eligible and still find that one panel lender’s figure lands short. The scheme answers the deposit question. The lender answers the capacity question. Finance Society commentary this week put it plainly: the scheme solves the deposit problem, not the borrowing capacity problem.
The scenario in numbers
Combined income of about $170,000, one applicant with regular overtime, no dependants, a car loan with eighteen months to run and a credit card with a $10,000 limit. Target purchase $720,000, deposit $36,000, loan required $684,000.
Lender one returned a maximum of about $664,000.
The same application, re-run on a second panel lender’s calculator, returned about $706,000. Nothing about the applicants changed between the two. What changed was the way each lender’s settings read the file.
Where the two calculators differed
Three settings accounted for most of the gap.
The first was the living-expense benchmark. Lenders use a version of the Household Expenditure Measure as a floor for declared expenses, and they do not all run the same version or apply it at the same income band. Bankwest, for example, updated its HEM benchmarks on 2 November. A higher benchmark floor reduces capacity even when the applicants’ own declared expenses are lower.
The second was income treatment. Lender one counted overtime at 80% of the verified figure. Lender two counted it in full because the applicant works in a category that lender treats as essential, where overtime is considered a standing part of the role rather than discretionary. On a few hundred dollars a week of overtime, that difference alone moved the capacity figure by tens of thousands of dollars.
The third was the assessment rate. Both lenders applied the 3% serviceability buffer, as APRA requires, but to different variable rates and with different floor rates beneath them. A few tenths of a percentage point in the assessment rate, compounded over a 30-year term, is enough to move a maximum loan figure materially.
The credit card was treated similarly by both, with a monthly commitment calculated on the limit rather than the balance. Reducing that limit before application would have helped at either lender, and it was done.
Where the scheme place sat
The scheme place sits with the application, through the lender. When the first lender’s figure fell short, no place was lost. The couple remained eligible, and the second lender reserved the scheme place through its own process once its assessment supported the loan. In Queensland, the scheme can also sit alongside the state’s first home buyer settings where the property qualifies, which is a separate question again.
What a broker actually re-runs
The phrase people use is “trying another lender”, which suggests submitting the same thing somewhere else and hoping. That is not what happens.
What is re-run is the serviceability model: the same income documents, the same liabilities and the same expenses, mapped against each panel lender’s known settings for overtime, benchmark floors, floor rates and liability treatment. The purpose is to find the lender whose policy reads this file accurately, before an application is lodged, rather than to lodge repeatedly and collect enquiries on a credit file.
In situations like this, the second lender was identified from the settings, not from a hunch. The application was lodged once more and approved at $690,000, a little above what was needed.
What mattered
The outcome in this case came down to recognising which assessment had produced the short figure. Eligibility had been confirmed by one party. Capacity had been tested by another, under one set of settings among 57. The couple’s situation did not change. The reading of it did.
Understanding how this is assessed before you apply puts you in a better position.
If you are weighing up the scheme and want the capacity question answered before you look at property, you can book a time to talk it through here.