Limits to High Risk Home Loans in Australia Coming in February 2026

Banks will only be allowed to issue up to 20 percent of new mortgages with a debt-to-income (DTI) ratio of six or more. The cap will apply separately to owner-occupier and investor loans.

APRA said the move aims to contain the build-up of housing vulnerabilities in the financial system.

“While overall bank lending standards remain sound, APRA has observed a pick-up in some riskier forms of lending over recent months as interest rates have fallen, housing credit growth has picked up to above its longer-term average and housing prices have risen further,” the regulator said.

It noted that a resilient labour market was contributing to a shift in the financial risk cycle.

“In particular, high debt-to-income (DTI) lending has started to pick up, albeit from a low base, driven by high DTI loans to investors,” APRA said.

“This is expected to increase further in this part of the cycle, and already high household indebtedness could increase further.”

APRA said it was acting now to prevent housing-related risks from high DTI lending, with support from the Council of Financial Regulators.

APRA Chair John Lonsdale said they would not wait for vulnerabilities to build before acting.

“One of the key structural risks to system stability that APRA has long been concerned about is high household indebtedness. Rising indebtedness has in the past often been associated with an increase in riskier lending and rapid growth in property prices,” Lonsdale said.

Currently, the signs of a build-up in risks are mostly concentrated in high debt-to-income lending, especially to investors.

“While strong investor activity can amplify housing lending and price cycles that can impact financial stability, we are not yet seeing signs of the broad-based build-up of housing vulnerabilities including a deterioration in lending standards that we have seen in previous episodes of strong investor activity,” Lonsdale said.