APRA to limit high debt-to-income home loans 

New Lending Limit Announced

The Australian Prudential Regulation Authority (APRA) has introduced a new macroprudential measure restricting authorised deposit-taking institutions (ADIs) to no more than 20% of new mortgage lending with a debt-to-income (DTI) ratio of six times income or higher, effective 1 February 2026. The cap applies separately to owner-occupier and investor lending.

Why APRA Is Acting Now

While lending standards remain broadly sound, falling interest rates, rising housing prices and above-average credit growth have contributed to an increase in higher-risk borrowing. High-DTI lending (particularly among investors) is expanding and could amplify Australia’s already elevated household debt burden if left unmanaged.

Guardrail, Not a Credit Squeeze

APRA does not expect the policy to affect near-term credit availability, noting most lenders currently sit well below the 20% threshold. The measure is intended as a pre-emptive stabiliser, signalling early regulatory intervention rather than a response to deteriorating conditions.

Exemptions and Proportionality

The cap excludes owner-occupier bridging loans and finance for new dwelling construction or purchases, ensuring continued property market functioning and housing supply incentives. Smaller ADIs will receive proportionate treatment, though the limit applies across the system.

Macroprudential Settings Remain Steady

APRA’s 3% serviceability buffer and 1% counter-cyclical capital buffer remain unchanged, forming part of a broader framework aimed at strengthening borrower and banking sector resilience.

Possible Future Action

Should high-DTI lending accelerate or competition weaken underwriting discipline, APRA may consider additional measures, including investor-specific limits.

Read more on the APRA website: APRA to limit high debt-to-income home loans to constrain riskier lending