Finance
Australia’s New Home Loan Rules: What APRA’s DTI Cap Means for Everyday Borrowers
Australia’s mortgage landscape is about to change. With the introduction of APRA’s new DTI rules in 2026, the Australian Prudential Regulation Authority is placing limits on how many high debt-to-income home loans banks can issue each year. The move, known as the APRA DTI cap, is designed to reduce risk in a market where household debt remains among the highest globally.
For everyday borrowers, the announcement has raised important questions: Will it become harder to get a loan? Will it slow the property market? And who is most affected?
This guide breaks down exactly what the new rules mean, why APRA introduced the DTI cap, and how Australian borrowers can prepare ahead of 2026.
Featured Snippet Summary
APRA will introduce a cap on high debt-to-income loans starting 1 February 2026. Banks may issue up to 20% of new loans at a DTI of six or more for owner-occupiers and another 20% for investors. APRA says the move aims to “guard against a build-up of systemic risks from very high household indebtedness.” Loans for new housing and bridging loans will be exempt. The change will not ban high-DTI loans but will limit how many lenders can issue each year.
Why APRA Introduced the DTI Cap
APRA regulates banks to ensure the financial system remains safe and resilient. As borrowing levels have risen, the regulator has become increasingly concerned about households taking on more risk than they can comfortably manage.
In its November 2025 announcement, APRA explained the reasoning clearly:
“APRA is taking this step now to guard against a build-up of systemic risks from very high household indebtedness.”
This aligns with global economic research. Economies with extremely high household debt become more vulnerable during downturns. If interest rates rise suddenly or unemployment increases, over-leveraged households may struggle to repay loans, which can cause widespread financial stress across the economy.
High-DTI loans—defined by APRA as loans where mortgage debt equals six times a borrower’s income—are among the riskiest categories. They are more sensitive to changes in interest rates and leave households with less flexibility in the event of economic stress.
By placing a limit on these loans, APRA aims to reduce the share of risky lending before it becomes a more serious national issue.
What Exactly Is Changing?
Starting 1 February 2026, the new rules require banks to:
- Limit high DTI loans (DTI ≥ 6) to 20% of new lending to owner-occupiers, and
- Limit high DTI loans (DTI ≥ 6) to 20% of new lending to investors.
These two categories are treated separately. In other words, a bank can have:
- Up to 20% high-DTI owner-occupier loans
- Up to 20% high-DTI investor loans
This gives lenders some flexibility while still ensuring the proportion of high-risk loans remains controlled.
Importantly, APRA emphasises that this is not a ban on high-DTI borrowing. The regulator states that “the limit will help constrain the share of new lending with very high debt-to-income ratios,” rather than eliminate such loans altogether.
What is exempt?
APRA has confirmed that certain loans will not be counted toward the cap:
- Loans for the construction or purchase of new dwellings
- Bridging loans for owner-occupiers
These exemptions aim to support housing supply and reduce disruption for Australians transitioning between homes.
Who Will Feel the Impact?
The answer depends on your financial position, income, and borrowing strategy. Here’s what the new rule means for different groups.
1. Everyday Home Buyers
Most home buyers fall below a DTI of six. For example, a household earning $150,000 per year would hit a DTI of six at a loan size of $900,000. Many Australians borrow less than this.
For these borrowers, little will change. Banks will still provide loans based on income, expenses, credit history, and serviceability checks. If your borrowing needs fall within typical ranges, the cap is unlikely to affect you.
2. Borrowers in Expensive Cities
High-cost markets like Sydney and Melbourne regularly push buyers toward larger loans. Applicants needing to borrow above six times income may find banks are more selective, especially if demand for high-DTI loans rises.
Borrowers may need:
- Bigger deposits
- Better credit profiles
- Stronger serviceability
The cap means lenders must ration high-DTI approvals, prioritising the most financially secure applicants.
3. Property Investors
Investors often rely on leverage to expand their portfolios. This has historically resulted in higher DTI levels among investor borrowers compared to owner-occupiers.
With the new 20% cap, investors may face tighter scrutiny or may need:
- More equity in existing properties
- Higher income documentation
- Stronger cash flow evidence
Investors with multiple properties may be among the first affected as lenders begin prioritising lower-risk profiles.
4. Self-Employed or Irregular Income Borrowers
Because variable income makes risk assessment more complicated, these borrowers may find high-DTI loans more difficult to secure. Banks may choose to allocate high-DTI slots to clients with more predictable earnings.
Will This Change the Housing Market?
APRA has been cautious not to claim that this rule will slow property prices. The regulator has repeatedly emphasised that this is a macroprudential safety measure, not a housing affordability policy.
The impact on prices may be limited because:
- Australia continues to face a housing supply shortage
- Population growth remains strong
- High-DTI loans are already a minority of lending
- The limit is not binding for most lenders today
However, the rule may influence behaviour by:
- Moderating investor borrowing growth
- Encouraging households to take on more sustainable debt levels
- Reducing riskier lending during periods of market heat
Any price effects are likely to be subtle rather than dramatic.
What Borrowers Should Do Before 2026
Even if you are not affected directly, preparing early can improve borrowing outcomes.
1. Calculate your DTI
Divide total mortgage debt (or planned debt) by your gross annual income.
Example:
$720,000 loan / $120,000 income = DTI of 6.
2. Reduce smaller debts
Lowering credit card balances, personal loans, and car finance improves your borrowing profile.
3. Build a larger deposit
A bigger deposit immediately reduces your overall DTI.
4. Strengthen your financial profile
Stable employment, consistent savings, and clean credit reports all help banks allocate high-DTI capacity to you if needed.
Conclusion
APRA’s new debt-to-income lending cap marks one of the most significant regulatory shifts in Australia’s mortgage landscape in recent years. While the change will not affect most everyday borrowers, it introduces an important safeguard designed to reduce risk in a highly leveraged housing market. For buyers and investors who rely on larger loans, the new framework will require more strategic planning, careful budgeting, and earlier preparation. As the 2026 implementation date approaches, understanding your borrowing position—and how lenders may adjust their criteria—will be essential. Ultimately, the DTI cap aims to support a more stable financial system, ensuring Australian households are better protected in the years ahead.
Frequently Asked Questions
1. Will high-DTI loans be banned in 2026?
No. Banks can still issue high-DTI loans, but only up to a limit. Each lender can allocate up to 20% of new lending to DTI ≥ 6 for owner-occupiers and another 20% for investors.
2. Will the average borrower be affected?
Most borrowers do not need loans above a DTI of six, so the majority will not be impacted. The biggest effects will be seen among investors and buyers in higher-priced markets.
3. Does this make homes more affordable?
APRA states the rule is not an affordability measure. While it may moderate some high-risk lending, its primary goal is to maintain financial stability.
