The Australian Prudential Regulation Authority (APRA) has introduced new lending guardrails that directly affect how much Australians can borrow. From February 2026, banks cannot issue more than 20% of new home loans to borrowers with a debt-to-income (DTI) ratio above 6. Combined with the existing 3% serviceability buffer, these rules are reshaping borrowing power across the country.

What Is a Debt-to-Income Ratio?

Your debt-to-income (DTI) ratio is a simple measure that compares your total debt to your gross annual income. It tells lenders how leveraged you are.

How to Calculate Your DTI

DTI = Total Debt ÷ Gross Annual Income

  • Total debt: Your new mortgage + any existing debts (car loans, credit cards, HECS/HELP, personal loans)
  • Gross income: Your annual pre-tax income

Example: $600,000 mortgage + $20,000 car loan = $620,000 total debt. If your income is $100,000, your DTI is 6.2x.

What Has APRA Changed?

APRA has imposed a "speed limit" on high-DTI lending:

  • Banks cannot issue more than 20% of new loans to borrowers with a DTI above 6x
  • This doesn't mean you can't borrow above 6x DTI - but it means lenders will be more selective about who qualifies
  • The 3% serviceability buffer remains in place - lenders must assess whether you can afford repayments at your rate plus 3%
  • These rules apply to all authorised deposit-taking institutions (ADIs)

Who Is Most Affected?

The DTI cap primarily impacts:

DTI Impact by Income Level

Gross Income Max Loan at 6x DTI Previously Possible* Reduction
$80,000 $480,000 $530,000 -$50,000
$100,000 $600,000 $670,000 -$70,000
$120,000 $720,000 $800,000 -$80,000
$150,000 $900,000 $1,000,000 -$100,000
$200,000 (couple) $1,200,000 $1,340,000 -$140,000

*Approximate borrowing capacity before DTI limits, based on serviceability buffer alone. Assumes no other debts.

Most Impacted Borrowers

  • Single income borrowers in expensive cities - especially Sydney where median prices exceed 6x most salaries
  • Property investors - existing investment debt counts toward your DTI
  • Borrowers with existing debts - car loans, HECS/HELP, and credit cards all add to your DTI
  • Upgraders - if you're borrowing more for a bigger home while carrying other debts

The 3% Serviceability Buffer - Still in Play

On top of the DTI cap, the existing serviceability buffer continues to apply. This means lenders assess whether you can afford repayments at your actual rate plus 3%.

Double Impact Example

If the current variable rate is 6.44%, the bank assesses you at 9.44%. On a $600,000 loan, that's:

  • Actual repayment: $3,810/month at 6.44%
  • Assessment repayment: $5,050/month at 9.44%

You need to prove you can afford $5,050/month even though you'll actually pay $3,810.

How to Maximise Your Borrowing Power

Even with stricter DTI limits, there are strategies to improve your position:

1. Pay Down Existing Debts First

Every dollar of debt you eliminate improves your DTI ratio. Prioritise paying off credit cards, personal loans, and car loans before applying.

2. Close Unused Credit Cards

Even if your credit card balance is zero, lenders count the full credit limit as potential debt. A $10,000 credit limit reduces your borrowing power by approximately $30,000-$50,000.

3. Pay Down HECS/HELP

HECS debt is included in DTI calculations. Making voluntary repayments before applying can improve your ratio significantly.

4. Apply Jointly

A dual-income application increases your gross income, bringing down the DTI ratio. Even a modest second income can significantly boost borrowing power.

5. Provide Evidence of All Income

Ensure overtime, bonuses, rental income, and any side income is properly documented. More income = lower DTI.

6. Choose the Right Lender

Different lenders calculate DTI slightly differently. Some are more generous with overtime, rental income, or HECS treatment. A mortgage broker can match you with the most favourable lender for your situation.

Pro Tip: Not All Lenders Are Equal

While APRA's rules apply to all banks, each lender still has its own credit policy. Some lenders may still approve loans above 6x DTI within their 20% quota. A mortgage broker can identify which lenders have capacity and appetite for higher-DTI loans.

What This Means for Property Investors

Investors are particularly affected because:

  • Your existing investment loans count toward total debt in the DTI calculation
  • Rental income offsets are typically discounted (lenders may only count 80% of rent)
  • Multiple properties compound the DTI challenge
  • The 20% speed limit means fewer high-DTI investor loans will be approved overall

Will These Rules Change?

APRA reviews its macroprudential settings regularly. The DTI limit could be:

  • Tightened further if investor lending or household debt grows too rapidly
  • Loosened if the housing market cools significantly or economic conditions deteriorate
  • Made permanent if APRA determines it should be a standard feature of lending assessments

For now, borrowers should plan around the current 6x DTI soft cap when estimating their borrowing capacity.

Check Your Borrowing Power Under the New Rules

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