Banks will now allow home buyers to increase their borrowing capacity by taking into account the income they can earn by renting out a room to a relative or friend.

Previously, banks would not take this income into account, but the Commonwealth Bank has announced it now will.

A spokesperson says it can factor in “boarder income” – up to a maximum of one boarder and $150 per week – when assessing a customer’s ability to service their loan.

The policy change is not available for investors.

It is expected to particularly help first-home buyers enter the market by improving their borrowing capacity and increasing their ability to service the loan.

It may allow buyers to borrow up to $50,000 more and it is hoped it will increase the number of rooms for rent.

Customers with guarantor support, claiming the First Homeowner Grants, or taking part in a Home Guarantee Scheme are also eligible.