BNPL crackdown: New credit laws tighten home loan requirements for Australian borrowers
Photo by Mark McCammon
Major regulatory changes affecting Buy Now Pay Later services are making it harder for some Australians to qualify for home loans, with mortgage brokers reporting increased scrutiny of borrowing applications since June 2025.
The Australian Securities and Investments Commission’s (ASIC) new regulations, which took effect on 10 June 2025, have fundamentally changed how Buy Now Pay Later (BNPL) services operate and how lenders assess home loan applications. Under the new framework, all BNPL providers must hold Australian Credit Licences and conduct mandatory affordability assessments, bringing them under the same regulatory oversight as banks and credit card companies.
For potential homebuyers, the changes mean BNPL accounts—including unused credit limits—are now treated as credit liabilities during mortgage assessments, potentially reducing borrowing capacity and affecting loan approval chances.
BNPL activity now part of credit assessment
The regulatory shift has created immediate implications for mortgage applicants across Australia. Lenders are now required to factor all BNPL arrangements into debt-to-income calculations, while missed or late BNPL payments may appear on credit files and negatively impact credit scores.
“We’re seeing lenders take a much closer look at clients’ BNPL usage patterns,” explains mortgage industry expert Coral Jacobs. “What used to be considered invisible credit is now front and centre in every home loan assessment. Clients who have multiple BNPL accounts or irregular repayment histories are finding their borrowing capacity significantly reduced.”
The changes are particularly impacting first-time buyers and younger demographics who have embraced BNPL services for everyday purchases. Industry data suggests these groups represent a significant portion of BNPL users, with services like Afterpay, Zip, and Klarna becoming commonplace for retail transactions.
Stricter affordability requirements
Under the new regulations, BNPL providers must conduct comprehensive affordability assessments, especially for transactions above $2,000. This mirrors the responsible lending obligations already imposed on traditional credit providers and represents a significant departure from the previously light-touch regulatory approach.
The Australian Financial Complaints Authority (AFCA) now has jurisdiction over BNPL disputes, while providers must implement robust complaint handling procedures and provide clearer disclosure of fees, repayment terms, and credit reporting implications.
For mortgage brokers, the changes have necessitated updated assessment procedures and client advisory processes. Brokers must now include detailed BNPL questioning in their needs analysis and factor these arrangements into serviceability calculations, treating them equivalent to other credit facilities.
Government schemes offer relief
While BNPL regulations tighten lending assessments, the Australian Government has simultaneously expanded access to home ownership through enhanced guarantee schemes for the 2024-25 financial year.
The First Home Guarantee scheme now offers 35,000 places annually, allowing eligible buyers to purchase with just 5% deposits without paying Lenders Mortgage Insurance (LMI). The Family Home Guarantee provides even lower barriers, requiring only 2% deposits for eligible single parents.
These schemes include income caps of $125,000 for singles and $200,000 for couples, with property price limits varying by location. In Sydney, the cap sits at $900,000, while regional areas often feature more generous limits to reflect local market conditions.
Strategic timing becomes critical
The intersection of tighter BNPL assessment and expanded government schemes has created a complex landscape for potential homebuyers. Financial advisors recommend strategic planning around BNPL usage in the months preceding home loan applications.
Industry experts suggest closing unused BNPL accounts and maintaining perfect repayment records for at least three to six months before applying for mortgages. This approach can help maximise borrowing capacity and improve approval chances under the new assessment criteria.
The regulatory changes also impact investment lending, where debt-to-income ratios carry even greater weight in lender decisions. Property investors with multiple BNPL arrangements may find their portfolio expansion plans affected by reduced borrowing capacity.
Regional market implications
Regional property markets, particularly in Queensland growth centres like Gladstone, may see varied impacts from the regulatory changes. While BNPL usage patterns differ between metropolitan and regional buyers, the fundamental assessment changes apply universally across Australian lending markets.
The combination of tighter credit assessment and continued regional property price growth means buyers in areas like Central Queensland need to carefully manage their credit profiles ahead of property purchases.
Industry adaptation required
Mortgage brokers across Australia are updating their processes to accommodate the new regulatory environment. This includes enhanced client education about BNPL implications, modified application procedures, and closer collaboration with lenders to understand evolving assessment criteria.
The changes represent the most significant shift in consumer credit regulation since the Banking Royal Commission recommendations were implemented, affecting millions of Australians who use BNPL services regularly.
For prospective homebuyers, the message is clear: BNPL arrangements are no longer invisible to lenders, and strategic credit management has become essential for successful home loan applications in Australia’s evolving regulatory landscape.
The full impact of these changes will likely become clearer over the coming months as lenders, brokers, and borrowers adapt to the new requirements. However, early indicators suggest a more cautious lending environment where comprehensive financial management extends beyond traditional credit products to include all forms of consumer finance.