APRA’s New DTI Limit: 5 Myths Investors Need to Stop Believing

What Is APRA’s New DTI Limit?

The Australian Prudential Regulation Authority (APRA) has introduced a new macroprudential rule that limits banks to issuing only 20% of new mortgages to borrowers with a DTI of 6 or higher.

This does not mean high-DTI loans are banned, but it does mean they will become more selective and competitive. Major banks are likely to reach their limits faster than smaller lenders.

APRA confirmed it will activate its Debt-to-Income (DTI) limit framework from 1 February 2026, citing rising levels of highly leveraged borrowing and the need to protect both households and the financial system.

While the rule may sound straightforward, it has already sparked confusion and concern among property investors. To separate fact from fiction, here are the most common myths circulating, along with the truth behind them.

Myth 1: High-DTI Loans Will Be Banned

One of the most widespread misunderstandings is that borrowing above a 6x DTI will no longer be possible. In reality, APRA’s rule does not ban these loans. Instead, it limits the number that each bank can approve.

From 1 February 2026, lenders may still issue loans where the total debt is six times the borrower’s income or more, but only up to 20% of their new lending for that quarter or rolling period. Once a bank reaches this cap, it must decline or defer additional high-DTI applications until the next reporting window.

In practice, this transforms high-DTI lending into a scarce allocation. It doesn’t eliminate the option, but it significantly narrows access to it.

Myth 2: The Rule Affects Everyone The Same Way

Many Australians will not feel the impact of the DTI limit at all. Most owner-occupiers and first-home buyers borrow well below a 6x DTI and therefore sit safely outside the new guardrail.
The borrowers most affected will be:

• Investors with multiple properties whose total debt already sits close to or above 6 times their income.
• Customers borrowing from major banks, which historically write a higher proportion of high-DTI loans.
• Investors relying on equity release or aggressive leverage to build their portfolios.

Meanwhile, three categories of loans are explicitly exempt:

• Construction of new dwellings
• Purchase of newly built dwellings
• Owner-occupied bridging finance

For many borrowers, it will be business as usual. For leveraged investors, however, the rule will influence timing and lender choice, far more so than it has in the past.

Myth 3: All Banks Will Give The Same Outcome Under The New Rule

As the 20% limit applies at the institution level, each bank will manage its allocation differently. A lender that typically writes a lot of high-DTI loans may hit its limit quicker, especially if investor demand surges.

This means two banks could give completely different decisions on the same scenario:

• Bank A may still have room left in its high-DTI quota and proceed with approval.
• Bank B may have already reached its quarterly limit and will need to defer or decline your application.
• Smaller lenders may have more flexibility due to their rolling four-quarter measurement period.

This is one of the biggest strategic shifts introduced by the rule.

Myth 4: New Builds & Constructions Loans Will Be Restricted

APRA has made it clear that it does not want to restrict housing supply or discourage construction activity. As a result, three loan types fall outside the DTI limit entirely:

• Loans to build new dwellings
• Loans to purchase newly constructed dwellings
• Owner-occupied bridging finance (when moving from one home to another)

This means investors using off-the-plan strategies, new builds, or dual-occupancy construction may be able to borrow at higher DTIs with fewer restrictions compared to those purchasing existing stock.

Myth 5: If You Can Service The Loan, You’ll Be Approved

Before this change, if your income, expenses, and buffers passed the lender’s servicing criteria, you were generally approved.

After the rule takes effect, approval will depend on both:

• 1. Your ability to service the loan, and

• 2. The lender’s remaining capacity within its 20% high-DTI allocation.

If the bank has already reached its limit, even highly creditworthy borrowers may face delays or rejections.

This marks a subtle but important shift: approval is no longer only about you; it’s also about the lender’s internal constraints.

What You Can Do Right Now

To stay ahead of the rule:

• Review your current DTI and debt position.
• Compare lenders, as each will manage its allocation differently.
• Restructure existing loans if needed to reduce DTI.
• Plan your investment moves earlier in the lending cycle.
• Avoid leaving applications until peak periods.
• Speak with a broker who understands lender-by-lender DTI capacity.

Being proactive will give you an advantage once the 2026 limit takes effect.

We’re here to guide you through these changes with clarity and care. Call us on 1300 889 743 or start your free enquiry online to talk to an expert.