Australian Prudential Regulation Authority activates debt-to-income limit capping high DTI mortgages at 20 percent of new lending

The Australian Prudential Regulation Authority (APRA) has activated a debt-to-income (DTI) lending limit as a macroprudential measure to contain a potential build-up of housing-related vulnerabilities, citing a recent pick-up in riskier lending as interest rates have fallen, housing credit growth has risen above its longer-term average and housing prices have increased. From 1 February 2026, authorised deposit-taking institutions (ADIs) will be permitted to originate up to 20 percent of new mortgage lending at a DTI ratio of six times income or more, with the limit applied separately to owner-occupier and investor lending. APRA expects the limit to be non-binding at an aggregate level initially and therefore not to materially affect near-term access to credit, though it anticipates a greater eventual impact on investors if high DTI lending rises toward the cap. Bridging loans for owner-occupiers and loans for the purchase or construction of new dwellings are excluded, and some proportionate treatment will apply for smaller ADIs. APRA kept other macroprudential settings unchanged, with the mortgage serviceability buffer remaining at three percent and the counter-cyclical capital buffer at one percent of risk-weighted assets, and indicated it could consider additional limits, including investor-specific limits, if macro-financial risks rise significantly or lending standards deteriorate.