From 1 February 2026, Australian lenders began operating under a new set of rules around debt-to-income lending, introduced by APRA, the banking regulator. It's the first time Australia has formally capped how much high-DTI mortgage lending banks can write. Here's what changed and what it means for borrowers.

What Are Debt-to-Income Limits?

A debt-to-income (DTI) ratio is calculated by dividing your total debt by your gross annual income. If you earn $120,000 a year and have total debt of $720,000 (including your new mortgage), your DTI is 6.

Under APRA's new rules, lenders can only write up to 20% of their new residential mortgage lending at a DTI ratio of 6 or above. Lenders are free to lend above a DTI of 6, but they can only do so for a limited proportion of their overall lending book. In practice, this means lenders will be more selective about which high-DTI applications they approve.

Who Is Affected?

For most borrowers, the DTI limits won't change anything. The restrictions mainly affect people who are already borrowing near the top of their capacity, particularly those with significant existing debt, multiple properties, or high loan sizes relative to their income.

The borrowers most likely to feel the impact include: property investors with multiple existing loans, borrowers in high-priced markets who need to stretch their borrowing capacity, and anyone with substantial non-mortgage debt (car loans, personal loans, HECS/HELP) that pushes their total DTI toward or above 6.

Why Did APRA Introduce This?

APRA's mandate is to maintain the stability of the financial system. Highly leveraged borrowing, when spread across a large portion of the mortgage market, creates systemic risk if property values fall or if a significant number of borrowers encounter financial stress simultaneously.

By limiting the share of loans written at high DTI ratios, APRA is reducing that concentration of risk in the banking system, even if individual borrowers are not necessarily in distress.

What It Means in Practice

Lenders are now applying more scrutiny to applications with high total debt relative to income. They are also tightening their treatment of non-standard income, add-backs for self-employed borrowers, and servicing buffers in general. Some lenders who were previously more generous at higher DTI levels are pulling back.

The practical effect for borrowers near the DTI threshold is that their lender options may narrow. A broker who works across multiple lenders can identify which ones still have room in their DTI quota and which ones are more likely to approve a given application.

How to Calculate Your DTI

Add up all of your debt obligations: your proposed new mortgage, any existing mortgages, personal loans, car loans, and the full credit limit on any open credit cards (not just the balance). Divide that total by your gross annual income. If the result is 5 or below, the APRA limits are unlikely to affect you. If it's approaching 6 or above, it's worth getting a clear assessment of your position before applying.

The Combined Effect of Rate Hikes and DTI Limits

The February 2026 rate hike and the new DTI limits arrived at the same time, creating a tighter lending environment than borrowers have experienced in several years. Higher interest rates reduce borrowing capacity directly. DTI limits add an additional layer of constraint for some borrowers. Understanding both is important when you're planning to borrow in 2026.

Get a Clear Borrowing Assessment

At Swish, we assess your borrowing capacity across the full lender market, accounting for current rates, serviceability buffers, and the DTI limits that now apply. If you're not sure where you stand, we'll give you a clear picture before you apply anywhere.

Book a free call with Swish to get a proper assessment of your borrowing capacity in the current lending environment.