APRA, the Australian Prudential Regulation Authority, has introduced new restrictions on how many high DTI (debt-to-income) loans banks can issue. These changes are designed to support finance stability as household debt levels continue to rise, particularly among property investors.
While borrowing conditions will change for some buyers, one important exemption is that these limits do not apply to construction loans or loans used to purchase newly built dwellings, which APRA has explicitly excluded from the DTI cap.
For many purchasers, this offers more flexibility and stability when choosing to build new. Read more below to understand what the DTI limits mean and how they may affect your buying journey.
What is DTI?
In Australia, DTI is a key measure that lenders use to assess how much you can safely borrow by comparing your total debt to your gross annual income.
DTI is calculated by dividing total debt (including proposed mortgage, credit cards, and loans) by gross annual income (before tax).
- E.g. A $700,000 loan with a $160,000 gross income results in a DTI ratio of approximately 4.375.
- A DTI ratio below 3.6 is considered ideal, while a ratio over 6 is generally regarded as high-risk, potentially limiting borrowing capacity.
- A high DTI loan means someone is borrowing 6 times or more of their annual income.
Borrowers can improve their DTI by:
- Increasing income
- Paying down existing debts
- Lowering the required loan amount
A high DTI doesn’t mean you can’t repay the loan, but it does signal higher risk if interest rates rise or financial circumstances change.
What is APRA changing?
APRA is acting to manage systemic risk after a rise in higher DTI lending, particularly among investors. While investment loans aren’t riskier on their own, they can put upward pressure on prices if leveraged heavily during market upswings.
From 1 February 2026, banks will only be allowed to issue a limited amount of high-DTI home loans:
- Up to 20% of new investment loans can be high DTI (6x income or more)
- Up to 20% of new owner occupier loans can be high DTI
While the DTI ratio itself only compares total debt to gross income, lenders will still consider dependents and living expenses separately when assessing serviceability.
APRA’s new rules mean that borrowing will become tighter for many investors, especially those who rely on leverage or already hold multiple properties. While the changes don’t stop investors from buying, they do change how banks assess borrowing capacity and how competitive the lending space will become.
Why this matters to you
These changes may impact your borrowing capacity and the way banks assess your application.
You might be affected if:
- You’re close to a DTI of 6
- You hold multiple loans or investment properties
- You rely heavily on leverage to buy
Even if you meet standard serviceability requirements, a lender may be more selective once it approaches its 20% high-DTI allocation for the quarter.
A lower DTI can also help you access:
- Better interest rates
- Lower fees
- More flexible lender options.
Loans that are exempt from the limits
Some loans won’t count toward the cap:
- Loans to build new homes
- Loans to buy brand new homes
- Bridging loans (temporary loans while moving house)
These are considered less risky or temporary and apply to all borrower types including owner occupier and investor.
If you’re looking to buy property in 2026:
With the new limits in place, buyers may increasingly look toward new builds or off-the-plan purchases, as these loan types are exempt from the DTI cap. This offers more borrowing flexibility, greater choice of property types, opportunities in growth-area developments and no unexpected renovation costs like established homes. You may also be eligible for off-the-plan stamp duty concessions.
YourLand, in partnership with our trusted builder network, offers a diverse range of new build options to suit different lifestyles, budgets and locations.
If you’d like guidance on purchasing strategies or securing finance under the new rules, YourLand’s mortgage broking partner, Ello Lending Co., specialises in off-the-plan and construction loans and can help you explore competitive lending options
You can visit the Ello Lending Co. website to find out more here.
