National Australia Bank (NAB) is making a key change to its mortgage assessment rules that could boost the borrowing power of some homebuyers by up to $30,000. Starting Friday, May 23, the bank will revise how it treats body corporate and strata fees in its loan calculations for owner-occupied properties. The update is expected to benefit first-home buyers and those purchasing townhouses, units, and apartments.<\/p>\n\n\n\n
The change relates to NAB\u2019s use of the Household Expenditure Measure (HEM)\u2014a standard tool used across Australian banks to estimate monthly living costs based on a borrower\u2019s demographic profile. Previously, NAB treated strata fees as additional living expenses, which could heavily reduce borrowing capacity. Now, the bank will classify these unavoidable fees under general living costs in the HEM framework, aligning them more closely with standard housing expenses.<\/p>\n\n\n\n
David Pelligra, a mortgage broker who welcomed the move, explained that body corporate fees have \u201cwildly impacted\u201d applicants\u2019 serviceability, despite being a mandatory cost for many apartment owners. Pelligra shared the example of a client whose $3,000<\/strong> annual fee\u2014equivalent to $250 <\/strong>per month\u2014was previously treated as an additional expense, significantly limiting the amount she could borrow. With the new approach, that same borrower could see her loan approval amount increase by around $30,000<\/strong>.<\/p>\n\n\n\n Banks determine loan<\/a> eligibility by combining HEM-based estimates with a borrower\u2019s declared additional living expenses. While HEM includes essential spending like utilities, groceries, and fuel, optional expenses such as life insurance or private school fees fall under separate scrutiny. Until now, strata fees were mistakenly categorized in that \u201coptional\u201d tier\u2014even though apartment owners have no choice but to pay them.<\/p>\n\n\n\n Ironic this gets released on a day the 10 year breaks through the technical support level of 4.50%. The 30 YR MBS 6% coupon is down 35 bps today – AKA mortgage rates will be higher today https:\/\/t.co\/BrDw0vJyFH<\/a><\/p>— The AI Mortgage Guy (@AImortgages) May 21, 2025<\/a><\/blockquote> \n\n\n\n The policy change reflects the growing shift toward higher-density housing across Australia\u2019s urban centres. As more first-time buyers turn to apartments and townhouses for affordability, NAB\u2019s revised HEM calculation acknowledges the real cost structures of these types of dwellings. The bank stated the update provides a \u201cmore accurate representation of regular household costs,\u201d ensuring borrowers<\/a> are not unfairly penalized.<\/p>\n\n\n\n The new classification aligns NAB\u2019s model with the reality that strata and body corporate fees are standard obligations tied to owning property in multi-residential complexes. By embedding these fees into the general living expenses already included in HEM, NAB streamlines its loan assessment process and brings it more in line with how modern homeownership functions in cities like Sydney, Melbourne, and Brisbane.<\/p>\n\n\n\n For brokers, the change simplifies loan application strategies for clients seeking to purchase strata-titled properties. Pelligra told Yahoo Finance that this is a \u201ccommon-sense move\u201d that directly responds to challenges frequently faced by his clients. While seemingly minor on paper, the reclassification can materially shift an applicant\u2019s borrowing threshold\u2014especially for those on tight budgets<\/a> or fixed incomes.<\/p>\n\n\n\nImproving Mortgage Assessments for Modern Housing Trends<\/h2>\n\n\n\n
Practical Implications for Buyers and Brokers<\/h2>\n\n\n\n