Brokers are split on whether banks should rush to strip negative‑gearing benefits out of investor serviceability calculators or hold firm until the tax changes are fully locked in.
Brokers are split as to whether lenders should rush to strip out negative‑gearing benefits from serviceability calculators, as more banks move to align their policies with the federal government’s tax changes.
The 2026–27 federal budget confirmed that negative gearing for established residential properties purchased after 12 May would be wound back from 1 July 2027, with tax deductions largely restricted to qualifying new builds and existing holdings grandfathered.
In response, a growing group of lenders have begun rewriting investor serviceability settings to reflect the changes.
‘Don’t punish borrowers in the transition’, broker says
Nick Lissikatos, director of Trelos Finance, believes lenders should avoid jumping ahead of the law and said he was concerned that stripping out negative‑gearing benefits too early could unfairly squeeze borrowers if the policy timetable slipped.
“The later, I think if lenders strip negative gearing now and the legislation doesn’t pass then they’re punishing the client in this transitionary period,” he said.
“I think the wait and see approach is a clever way some lenders are staying relevant during this period. By continuing to lend with negative gearing benefits applied, they’re standing out from other lenders when it comes to how much the client can borrow.”
Warning over ‘outdated’ approvals
Lissikatos also accepted that holding off on calculator changes created its own risks and added that the prospect of clients being approved on assumptions that would likely not continue beyond 2027 had become a central theme in his day‑to‑day conversations.
“I’ve been having this conversation with all my pipeline and new clients all week, we need to ensure they understand that any point their borrowing power may change and plan for that accordingly,” he said.
He said experienced investors recognised the need to move quickly while the current rules still applied, whereas newcomers needed more guidance.
“The clients who know what they’re doing (existing investors) understand they need to move quickly to ‘get in’ before the changes go live,” he said.
“The first-time investors require a lot more hand-holding during this time.”
Lissikatos reported that the shifting landscape had already changed how many households were thinking about property wealth.
“We’ve started to see a shift from the ‘rent-vest’ strategy to now considering purchasing a property to live and be done with it,” he said.
He said that uncertainty around in‑flight applications and even dollar‑for‑dollar refinances was producing considerable friction.
“It's causing us brokers and the lenders huge delays, every day we’re going back and forth to make sure the deal is still working and trying to escalate everything we can possible to get these over the line,” Lissikatos said.
Broker says banks ‘delaying the inevitable’
Meanwhile, Tony Xia, director and broker at The Mortgage Agency, said that lenders should align serviceability with the budget changes immediately.
“They should be proactively removing them, the current policy ambiguity has already drained an estimated 60–70 per cent of residential investors out of the market, heavily impacting first-time investors,” Xia said.
“If all lenders immediately stopped using negative gearing as a borrowing add-back, investors would have the certainty they need to understand their true capacity.”
He said the transitional period was already causing heavy friction among investor clients.
“It is creating massive friction, particularly for first-time investors who feel trapped between two sets of rules,” he outlined.
“Because this is completely uncharted territory, almost all of our investor clients with in-flight applications are frustrated, confused, and uncertain.”
Xia was critical of banks that continued to use full negative‑gearing benefits in their calculators for new purchases of established properties.
“It is simply delaying the inevitable and actively putting new investors buying established properties at immense risk,” he said.
Call for unified lender approach
Xia said he wanted industry groups to corral lenders into a common position to minimise confusion.
“Industry bodies like the MFAA and FBAA need to bring lenders to the table immediately to establish a unified policy,” he said.
“Every day, brokers field urgent questions from anxious clients and professionals seeking updates on lender positions. The current fragmented landscape isn’t just damaging the broking channel; it is hurting investors and allied professional businesses across the board.”
Xia also warned that if most lenders waited, the system could end up with a sizeable cohort of borrowers whose approvals were built on tax settings that would soon vanish.
“It is our duty to show clients exactly what their borrowing power is without negative gearing applied,” he said.
However, Xia explained that demand had not dissipated, yet had shifted into different channels.
“Our standard investor inquiry volume has easily dropped by 50–60 per cent. However, this has been instantly offset by increased activity from first home buyers, SMSF clients, and upgraders looking to convert their current principal place of residence into an investment,” he said.
Which banks have announced changes to their investor serviceability calculators
Macquarie Bank was first out of the blocks, removing most negative‑gearing add‑backs from its calculators for new investment loans, and National Australia Bank (NAB) followed, telling brokers it would generally limit negative‑gearing recognition to new‑build stock for fresh investor applications.
Connective Horizon, the aggregator’s white label product funded by Brighten, also confirmed that negative‑gearing benefits would no longer be included in serviceability tests for established property deals, while Great Southern Bank has taken a similar stance.
Australia and New Zealand (ANZ) told brokers on Wednesday (27 May) that investment properties purchased after 12 May would only attract negative‑gearing treatment in servicing if they qualified as new builds, with Suncorp stating that applications not unconditionally approved by 27 May would be reassessed under revised settings.
[Related: More lenders announce investor servicing reset]
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