Following this month’s interest rate increase, borrowing capacity is under more scrutiny than ever — and how your living situation is assessed can make all the difference.
One area that often contributes to the differences in borrowing capacity is actual rent vs notional rent.
🏠 Actual Rent
If you’re renting:
* Lenders can clearly see your rental commitments
* Repayments are assessed alongside rent paid
* Your borrowing capacity is tested against higher buffers when rates rise
🏡 Notional Rent
* If you’re living with parents or family:
* You may not be paying market rent
* Lenders often apply a notional (assumed) rent or board amount
This can be lower than market rent, depending on the lender
Why this matters more when rates are under pressure?
For some buyers, notional rent can actually soften the impact, because:
✔️ Assumed living costs may be lower than market rent
✔️ Strong savings history becomes more important
✔️ Lender policy differences have a bigger effect on outcomes
In a rising-rate environment, borrowing capacity isn’t just about income — it’s about how your living situation is interpreted.
Two borrowers with the same income and savings can receive very different outcomes, strategy and lender selection matter more than ever.
Let’s review your situation now to make sure you’re in the strongest position.