How Recent Lending Changes Are Shaping the Property Market in 2026

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Understanding lending is important if you’re serious about property investment. Lending determines how much banks are willing to loan you, the structures available, and how financing rules are evolving. These changes will significantly shape the property landscape over the next couple of years, so staying informed is essential.

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Why Finance Drives Property Markets

Most property purchases in Australia rely on finance. When lending tightens, property markets often experience a lag effect, causing prices to slow or even decline. Conversely, when credit flows freely, property values can rise quickly.

The impact of lending on property markets isn’t new. In 2016, Sydney’s property market hit record highs, partly fuelled by relaxed lending practices. At that time, deposits as low as 3–5% were common, and there was minimal oversight on borrowers’ income or assets. Interest-only loans were widespread, and debt-to-income ratios weren’t strictly enforced. This period highlighted how crucial responsible lending is in preventing market volatility.

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How Banks Assess Borrowers

Banks calculate borrowing capacity using interest rates plus a buffer, usually around 3% to ensure you can meet repayments even if rates rise. Rental income is also “shaded,” meaning only a portion of rental earnings is counted towards borrowing capacity. These measures ensure loans remain manageable for borrowers and prevent excessive risk in the system.

With interest rates fluctuating, these calculations directly affect how much you can borrow and, ultimately, which properties are within reach.

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Key Lending Updates You Need to Know

Several recent changes are reshaping property finance:

1. Trust Lending Restrictions: Some banks, such as Macquarie, are no longer offering loans to trusts. Trust lending had become popular due to its flexible borrowing capacity, but now loans typically need to be in a personal name. While other banks may still offer trust lending, this change signals a potential tightening of available credit.
   
   
2. 40-Year Loan Terms:  Certain lenders are now offering 40-year loans instead of the traditional 30 years. A longer term reduces monthly repayments, effectively increasing your borrowing capacity by 8–10%. On a $1 million property, this could mean an extra $80,000–$100,000 in borrowing potential.
   
   
3. LMI Waivers and Low Deposit Options: Some lenders now allow high loan-to-value ratios (up to 90%) without requiring lenders mortgage insurance (LMI). This removes a major barrier for buyers with smaller deposits, making property more accessible and helping you enter the market faster.
   
   

Why These Changes Matter

Lending availability is like a tap: the more credit flowing, the more it feeds into the property market. When lending tightens, fewer buyers can participate, which can temporarily suppress prices. Conversely, when banks loosen credit and offer innovative products, it opens opportunities to secure properties before competition increases.

Understanding these shifts is key to making informed decisions and capitalising on opportunities that others may miss. Sophisticated investors leverage these strategies to increase borrowing capacity, structure loans effectively, and optimise property portfolios.

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Planning Your Next Move

With supply constraints, growing demand, and changing lending rules, acting strategically is more important than ever. Aligning your investment strategy with the latest lending updates allows you to secure the right properties under the right conditions, maximising potential growth and returns.

If you want to kickstart your investment property journey, book a free discovery call with Search Property to explore tailored strategies for your situation, increase your borrowing capacity, and plan your next property investment with confidence.

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