Every regulatory and credit-policy term that lives on the broker desk in Australia — defined in plain English. Bookmark it.
A licence issued by ASIC under the National Consumer Credit Protection Act 2009 that authorises a person or company to engage in credit activities (including credit assistance — what brokers do). Every credit transaction in Australia must be conducted under an ACL or by a Credit Representative of one.
An individual or company authorised to act on behalf of an Australian Credit Licence holder. Most mortgage brokers operate as Credit Representatives under their aggregator's ACL, rather than holding their own. The aggregator handles the licensing umbrella, compliance, and PI insurance.
The federal legislation governing consumer credit in Australia. It introduced responsible-lending obligations (don't lend money the borrower can't repay without substantial hardship), disclosure requirements (credit guides, credit quotes), and the ACL regime. NCCP applies to consumer credit; commercial lending is mostly outside it.
A prudential requirement set by the Australian Prudential Regulation Authority under APS 220. ADIs (banks and credit unions) must assess loan serviceability at the actual rate plus the buffer — currently 3.0% (since Nov 2021). Sets a floor; lenders may apply higher. There is a refinance carve-out where a 1% buffer can apply.
A benchmark of minimum sensible living expenses published quarterly by the Melbourne Institute. Segmented by household composition, postcode and income. Lenders use it as a floor for declared living expenses — if you declare less than HEM, the lender substitutes HEM (often with a multiplier of 0.95–1.05×).
Total debt (existing + proposed loan, including credit card limits) divided by gross annual income. APRA encourages ADIs to limit DTI > 6× exposure to under 30% of new lending. In practice most majors soft-decline at DTI > 7× and aggressively decline at > 8×.
The loan amount divided by the lender's accepted property valuation, expressed as a percentage. LVR > 80% typically attracts LMI (Lenders Mortgage Insurance) or LMI-waiver products. Most majors cap at 95% LVR including LMI; non-banks vary 85–95%.
An insurance policy that protects the lender (not the borrower) against loss if the borrower defaults and the security sale doesn't cover the outstanding balance. Required for most loans above 80% LVR. Premium scales with LVR and loan size; usually capitalised on top of the loan. LMI-waiver products exist for low-LVR professionals (doctors, lawyers, accountants) and for some first-home buyer schemes.
The haircut a lender applies to gross income before serviceability. PAYG base salary is typically 100%, self-employed 80% of 2-year average net + addbacks, casual 80%, overtime 50–80%, rental 75–80%, bonus/commission 80%. Variation between lenders here is a major driver of borrowing-capacity differences.
The Higher Education Loan Programme repayment, automatically deducted from gross income via the ATO once income exceeds the repayment threshold (~AUD 54k in 2025-26). Income-based, scales from 1% to 10% of gross. Lenders treat the ATO repayment amount as a liability for serviceability — small individually, big collectively for high-income borrowers.
Loans secured against the borrower's own home (OO) typically attract lower headline rates and tighter responsible-lending checks than loans secured against a rental property (INV). APRA has historically capped investor lending growth and may apply differential capital weights, so investor pricing usually sits 20–30 bp higher.
An IO loan defers principal repayment for a period (typically 1–5 years, max 10 years). Lenders assess serviceability at the eventual P&I repayment over the remaining term, not at the IO repayment — a critical detail brokers miss in maximum-borrow calcs. After the IO period, repayments step up by 20–40% — borrowers need to be able to cope.
Since Jan 2021 brokers have a statutory Best Interests Duty under the NCCP — must act in the consumer's best interests when providing credit assistance. Practically: documented research across multiple lenders, transparent commission disclosure, and a clear record of why the chosen lender was selected. Tools like serviceability calculators help generate the audit trail.
A company that holds an ACL and provides the licensing, compliance, lender accreditations, technology and PI insurance for a network of Credit Representative brokers. Major Australian aggregators include AFG, Connective, FAST, Finsure, LMG, PLAN Australia, Specialist Finance Group, and Vow Financial. Brokers usually pay a flat monthly fee plus a small commission split.
The NCCP Chapter 3 obligations on credit licensees: make inquiries about the consumer's financial situation, verify those inquiries through evidence (payslips, statements), and assess whether the credit contract is "not unsuitable". The 2020 Westpac case clarified that lenders cannot rely solely on HEM as the expense assumption — declared expenses must be tested.
Want the maths behind these terms? Read How serviceability works in Australia (2026 edition) for a worked example.