From 1 February 2026, the Australian Prudential Regulation Authority (APRA) is moving to impose tighter controls on high debt-to-income (DTI) lending for home loans. Specifically:
- Banks must cap their total amount of home loans with DTI greater than or equal to 6x income at 20% of their new lending approvals, separate caps apply for:
- Owner-occupied loans
- Investor loans.
- Exemptions include:
- Bridging finance for owner-occupiers
- Loans for purchasing or constructing new dwellings, to keep property transactions and housing supply flowing.
Why the Move?
APRA has identified several risks that prompted this change:
- A recent rise in riskier forms of lending, particularly among investors, has followed lower interest rates, strong credit growth, and housing price increases.
- Although overall high-DTI lending is still relatively low, it’s driven by investment loans. With persistent low rates and a resilient labour market, APRA worries this could trigger systemic vulnerabilities.
- If left unchecked, rising household indebtedness may threaten financial stability. The goal is to act pre-emptively, rather than reactively to vulnerabilities.
APRA Chair John Lonsdale emphasised the intent to strengthen resilience across both the banking and household sectors, noting that investor-led credit flows tend to amplify housing cycles.
Broader Macroprudential Framework
This DTI cap sits within a broader suite of tools APRA already uses:
- A 3% serviceability buffer above the loan rate
- A 1% countercyclical capital buffer on risk-weighted assets.
What does this mean?
- 3% Serviceability Buffer
When you apply for a home loan, the bank doesn’t just check if you can afford the current interest rate and repayment. They add an extra 3% on top of the actual rate to make sure you could still make repayments if rates go up in the future.
Example: If your loan rate is 6%, the bank tests your ability to pay as if the rate were 9%.
Why? It’s a safety net to protect you (and the bank) from financial stress if interest rates rise.
- 1% Countercyclical Capital Buffer
This is something banks have to do behind the scenes. APRA makes banks keep an extra 1% of their capital in reserve during good economic times.
Why? If the economy slows or there’s a financial shock, banks have a cushion to absorb losses and keep lending. Think of it like a rainy-day savings account for banks, so they stay strong and stable even in tough times.
APRA also has existing powers to set Lender portfolio-level lending caps. This means the Lender needs to keep an eye on their cross-section of different lending features. These include Debt-to-Income and Loan-to-Value Ratio thresholds, interest-only loan volume limits, and investment lending percentages.
Intended Impacts Across the Market
- Homebuyers (owner-occupiers):
- Face the 20% cap, but benefit from exemptions for new-build and construction-related loans.
- Property investors:
- Likely to feel the strongest effect. APRA notes that high-DTI lending is currently concentrated among investors.
- Smaller Authorised Deposit-Taking Institutions:
- Subject to the cap, but approach may be scaled to reflect their size and lending footprint.
- Developer and channelled housing finance:
- Supported via the carve-out for new dwelling construction.
Conclusion
As a mortgage broker, it’s critical to for us to stay on top of these changes to better support our clients. Here’s what that means for you—and how we’ll make it easier:
We Stay Ahead of the Curve
We keep up with every APRA and lender update so your loan application meets the new rules, including the 20% cap on high-DTI lending. This means keeping in touch with our Lender partners to understand their tolerance and exposure to this cap so we can support our clients effectively.
We Find Smart Solutions
If you’re an owner-occupier who is close to the limit, we’ll explore exemptions with you like new-build properties or bridging finance so you can move forward without hitting the cap.
We Set Realistic Expectations
For investors, we’ll explain how these changes affect borrowing power and help you plan strategies that still meet your goals.
We Track Every Detail
Lenders will update calculators and policies. We’ll monitor these changes and keep you informed so your purchase and application processes remain smooth and compliant.
We Keep You Protected
Our processes meet ASIC and Lender standards, with accurate records and transparent advice – so you can borrow with confidence.