Bankwest drops refinance buffer to 1%: who qualifies and what it means

Bankwest has introduced a refinance exception that cuts the serviceability buffer from the industry-standard 3% to just 1% — one of the most aggressive buffer reductions in the Australian mortgage market right now. The policy took effect in May 2026 and is available through the broker channel.

What changed

Since October 2021, APRA has required Australian lenders to assess new borrowers at 3 percentage points above the loan’s actual rate. For a borrower on a 6.00% variable loan, the bank runs the numbers at 9.00%. This single rule has locked tens of thousands of existing borrowers out of refinancing, even when the new loan would be cheaper than their current one.

Bankwest’s Refinance Exception Assessment lets brokers submit eligible refinance applications assessed at the loan rate plus 1% instead of plus 3%.

Example: A borrower currently paying 6.29% on a $600,000 loan wants to refinance to a 5.79% product.

• Under standard APRA buffer (5.79% + 3.00% = 8.79%): servicing fails for many middle-income households
• Under Bankwest’s 1% exception (5.79% + 1.00% = 6.79%): servicing passes comfortably because it is close to what they are already paying

In practice, this means a household that has been making repayments without issue on a 6.29% loan can now refinance to a lower rate, even if they would fail the standard 3% stress test.

Who qualifies

The exception is narrow by design. Here are the eligibility criteria, according to Bankwest’s broker communication dated May 2026.

Must meet all of the following:

In plain terms: if you have 20% equity, have held your current loan for at least a year, have never missed a repayment, and are not trying to borrow extra, you are in the running.

Who is excluded

The exclusion list is long and specific:

• Self-employed applicants, including salaried self-employed (PAYG directors of their own company)
• Bridging or construction loans
• Applications with more than 2 borrowers, a guarantor, or overseas addresses
• Owner-occupied with interest-only repayments
• Applicants currently in hardship or with accounts in arrears
• Additional lending of any kind: no cash out, no debt consolidation, no new credit card
• Divorce or separation applications where the borrower structure goes from two to one

Important caveat: no other policy exceptions are permissible, except where they relate to income evidence documentation. You cannot stack this with an LVR waiver, a credit impairment exception, or any other Bankwest policy override.

Why this matters

The 3% buffer was introduced in October 2021 when the cash rate was 0.10% and the average new variable rate was around 2.50%. A 3% add-on made sense: it tested whether the borrower could survive rates returning to ~5.50%.

In May 2026, with the cash rate at 4.10% and new variable rates around 5.80%-6.50%, the 3% buffer means banks are testing borrowers at 8.80%-9.50%. That is stress-testing for a scenario that would require the cash rate to reach roughly 7%, which the RBA’s own forward guidance suggests is not on the table.

The result is a growing pool of “mortgage prisoners”: borrowers who can comfortably afford their current repayments (and have the 12-month track record to prove it) but cannot refinance to a lower rate because they fail a stress test on a rate they will never actually pay.

Bankwest’s 1% buffer directly addresses this. The $10,000 or 1% cap on extra borrowing also prevents the exception from being used to lever up — it is strictly for switching lenders to a better deal.

How it compares to the broader market

Bankwest is not the only lender adjusting its buffer. As of May 2026:

ANZ was first to move with a similar 1% buffer exception. Bankwest (a CBA subsidiary) is the second major lender group to offer this — and CBA itself still has no public exception, creating an unusual dynamic where the subsidiary is more flexible than the parent.

Smaller non-bank lenders have long used reduced buffers as a competitive advantage, but having two major banking groups now offering it signals a shift in industry thinking about the buffer in a higher-rate environment.

What to do if you think you qualify

1. Check your LVR. If your property has appreciated since purchase, you may have crossed the 80% threshold without realising it. Order a valuation or ask your broker to run an AVM check.
2. Pull your repayment history. Your credit file shows 24 months of repayment markers. You need a completely clean 12 months.
3. Calculate your exact payout figure. If your current loan balance plus discharge costs exceeds the existing limit by more than the lower of $10,000 or 1%, you are outside the exception.
4. Confirm employment type. If you are PAYG (not self-employed), you clear the biggest exclusion hurdle.
5. Talk to a broker. This exception is only available through the broker channel, not direct-to-bank applications.

The bottom line

For a PAYG borrower with clean repayment history and 20% equity, Bankwest’s 1% buffer removes the single biggest obstacle to refinancing in 2026: passing a stress test on a rate that does not reflect reality. The narrow eligibility and long exclusion list mean it is not a broad loosening of credit standards. It is a targeted fix for mortgage prisoners — and it is worth checking whether your file qualifies.

This article is general information only and does not constitute financial advice. Your personal circumstances, including income, expenses, credit history and financial goals, determine what loan products are suitable for you. Speak to a licensed finance professional before making any refinancing decision.

Arrivau Pty Ltd (ABN 81 643 901 599) is a credit representative (CRN 530978) of a licensed Australian credit licensee. Mitchell Harding is a finance writer, not a financial adviser.