Since February 2026, banks have been limited in how many large loans relative to income they can write. Since then, the cash rate has risen to 4.60%. You might expect the two to combine into a squeeze. The data says otherwise, at least for now, and the reason matters for anyone planning their next purchase.

What is APRA’s debt-to-income cap?

From February 2026, banks must limit new mortgage lending at a debt-to-income ratio (DTI) of six or more to 20% of new lending. The limit applies separately to owner-occupier and investor lending and is measured quarterly (Australian Prudential Regulation Authority [APRA], 2025). Loans to buy or build new homes, and owner-occupier bridging loans, are exempt (APRA, 2025).

A DTI of six means total debt of six times income. For a household earning $150,000, that is $900,000.

APRA introduced the cap as a guardrail after high-DTI investor lending rose to around 10% of new investor loans in the September 2025 quarter, the highest since 2023 (APRA, 2025).

Is the DTI cap limiting lending?

Not at a system level. In the June 2026 quarter, only 3.7% of new owner-occupier loans and 8.9% of new investor loans had a DTI of six or more (APRA, 2026b). Both sit far below the 20% limit.

APRA said as much in May: high-DTI lending “remains well below APRA’s DTI limits and so the limits are not restricting overall bank lending” (APRA, 2026a). It kept the limits in place “as guardrails for now”.

Why isn’t the cap biting?

Because rising rates got there first. Lenders assess new loans at your interest rate plus a 3 percentage point buffer, which APRA has held steady (APRA, 2026a). Every rate rise lifts that assessment rate and cuts how much you can borrow.

Cotality estimates the four rate rises since February have cut borrowing capacity by almost $90,000 for a median-income household, about a 9% fall in purchasing power (Lawless, 2026).

Here is an illustration using our own figures. At an assessment rate of 9.85%, a $900,000 principal and interest loan over 30 years costs about $7,800 a month. For a household on $150,000, that is around 62% of gross income before tax or living costs. Very few borrowers pass serviceability at that level, so they never reach a DTI of six. For most people, serviceability caps the loan before the DTI limit does.

Who is the cap affecting?

Investors with several properties. DTI counts total debt, so each additional investment loan pushes it higher. Some lenders have set their own DTI limits below APRA’s threshold, and brokers report investors being declined when total debt sits above six or seven times income, even where they can afford the repayments (Martin, 2026).

Borrowers at banks near their limit. The 20% cap applies to each bank, not the market. A bank that has used up its high-DTI allowance may decline a loan another bank would approve (Dargan, 2026).

Not first home buyers, mostly. Owner-occupier high-DTI lending has wide headroom under the cap (APRA, 2025).

What happens next?

Investor demand is already falling. Investor loan commitments dropped 8.6% in the June quarter, the largest fall since September 2022 (Tchetchenian, 2026). With fewer large investor loans being written, the cap has less to restrict.

The risk is a change in direction. If rates fall, borrowing capacity rises and high-DTI lending can climb back towards the cap. APRA has said it will adjust settings if needed (APRA, 2026a).

What should borrowers do?

Frequently asked questions

What is a good debt-to-income ratio for a home loan? Below six is outside APRA’s high-DTI category. Individual lenders may apply lower internal limits.

Does APRA’s DTI cap apply to new builds? No. Loans to buy or build new homes are exempt.

This article is general information only. Speak to a licensed credit adviser before making borrowing decisions.

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