APRA has announced a new cap on high debt-to-income lending. From February 2026, banks will be allowed to write no more than 20% of new loans with a debt-to-income (DTI) ratio of six or above.
The limit applies separately to owner occupiers and investors. It’s also a hard cap, not a benchmark.
On current data, the cap is not binding, but banks won’t want to run right up to the limit. Some lenders may tighten internal credit policies early and this is most likely to impact investors and higher risk borrowers.
What APRA is and why it matters to investors
APRA was created to keep the financial system stable and prevent credit quality from slipping when markets heat up. It supervises banks, insurers and super funds
For property investors the key point is that it supervises the mortgage market, which dominates Australian bank balance sheets.
Australia has one of the highest mortgage debt-to-income levels in the developed world and is one of the highest variable rate mortgage markets globally. That means changes in interest rates flow through to borrowers quickly.
APRA indirectly caps borrowing capacity without setting prices. When lending standards drift or credit grows too fast, APRA intervenes.
Why arrears stay low despite high debt
Despite rapid rate rises, mortgage arrears in Australia have stayed comparatively low and have only moved back toward pre-pandemic levels.
A key reason is that Australian borrowers often hold thicker buffers in offset and redraw accounts than almost any other mortgage market. Another factor is lender choice and the depth of the mortgage broking industry.
The Reserve Bank has also pointed out that arrears in Australia remain comparable with the United States, despite the US having thirty year fixed mortgages. The RBA attributes this resilience to strong employment and stricter lending standards. Australia adopted tighter serviceability tests well before many countries and didn’t have the same wave of subprime lending seen overseas before the GFC.
Behaviour matters too. Australians often pay ahead, with tax refunds or bonuses going straight onto the mortgage.
APRA’s key interventions and what they did to credit
2014: Investor credit growth limits
In 2014 investor lending was accelerating at around 10% a year and in some pockets above that. APRA told banks to keep investor credit growth under 10% or face supervisory consequences.
That pushed banks to cool investor appetite and tighten serviceability. It was also the period when investor interest rates became more expensive than owner occupier rates.
2017: Interest only lending crackdown
In 2017 APRA told banks to limit interest only lending to 30% of new lending and pull back sharply on high loan to value interest only loans.
This hit leveraged investors hardest, particularly in Sydney and Melbourne where valuations had run ahead of incomes. The correction that followed was driven by credit rationing at the margin rather than a downturn in employment.
2021: Serviceability buffer increased
In 2021 APRA increased the serviceability buffer from 2.5% to 3% above the lending rate. That single decision cut borrowing capacity for many buyers by tens of thousands of dollars.
The buffer has remained at 3% even after rates surged, reflecting concerns about household leverage and job market momentum.
The new rule: the February 2026 DTI cap
From February 2026, banks will be allowed to write no more than 20% of new loans with a DTI of six or above.
What “DTI of six” means
- If gross income is $100,000, a DTI of six is $600,000 of debt.
- If combined income is $250,000, a DTI of six is $1.5 million of debt.
- If combined income is $400,000, a DTI of six is $2.4 million of debt.
APRA has framed this as prevention, not cure. Importantly, bridging loans and loans for new housing are exempt, which supports construction rather than discouraging new supply.
On current data, the cap is not binding. Only about 4% of owner occupier loans and about 10% of investor loans are above six times income today.
Even so, lenders are likely to keep a safety margin. That can lead to tighter internal policy settings before the cap technically binds, including closer scrutiny of overtime, bonuses, secondary incomes, rental shading and self employed income.
Who is most likely to feel it
For investors, the most exposed group is those borrowing aggressively in expensive markets where loan sizes push the DTI above six.
Some high income owner occupiers in premium parts of Sydney and Melbourne may also feel it, especially dual income households stretching for blue ribbon suburbs.
Most first home buyers outside inner capital city rings are unlikely to notice the change.
What this means for your investor strategy
This cap doesn’t lower prices and for most, will not cut borrowing capacity.
What it does is put a clearer boundary around aggressive leverage. For portfolio builders, sequencing matters.
Practical implications that follow from the new settings:
- If you plan to borrow above six times income, lender selection matters because some lenders may become stricter earlier than others.
- Expect more scrutiny on how lenders treat variable income and how rental income is assessed.
Resilience matters more than ever. Investors relying on organic rent increases, wage growth and diversified income sources should adapt more easily than investors relying on maximum leverage.
As a broader message, Australia is aligning with international best practice. Australia has high mortgage debt, high variable rate exposure and tight housing supply, but it also has a regulator willing to step in early. That is a key reason arrears have risen only gradually despite pressure on borrowers.
Investor takeaway
Banks can still write DTI above six loans, but they will be managing a hard cap. If you are operating near that leverage level, be prepared for tighter scrutiny and more variation between lenders.
At the deal level, purchase price decisions should reflect cash flow comfort and buffers, not just what a serviceability calculator says you can borrow.
For more information, listen to the Property Trio Podcast
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