APRA introduces new DTI lending limits: What it means for borrowers and investors

The Australian Prudential Regulation Authority (APRA) has announced a major policy change designed to strengthen the resilience of Australia’s financial system and curb riskier lending practices. From 1 February next year, banks will face new restrictions on how much high debt-to-income (DTI) lending they can approve.

If you're buying in Wollongong, the Illawarra or anywhere across NSW, here’s what you need to know — and how it may shape your borrowing options.

Why APRA is stepping in now

With interest rates falling through 2025, the property market has accelerated. Housing credit growth is now rising above long-term averages, listings remain tight and prices continue to climb. At the same time, APRA has noticed an increase in riskier high-DTI lending, particularly among investors.

A high DTI loan is where a borrower’s total debt is six times their income or more — and while this lending has been low in recent years, it’s now trending upward.

APRA is acting early to prevent vulnerabilities from building in the system, especially given Australia’s already-high household debt compared to global standards.

APRA Chair John Lonsdale put it simply: It’s better to contain the risk now than face instability later.

What the new DTI limit means

From 1 February, banks will only be able to issue up to 20% of their new mortgage lending at a DTI of 6:1 or higher.

A few key points:

• The 20% cap applies separately to:

  • Owner-occupier loans

  • Investor loans

• Only a small number of lenders are currently close to this limit, meaning no immediate impact on most borrowers.

• APRA expects the guardrail will matter more for investor lending, as investors typically borrow at higher DTI ratios.

• The limit excludes:

  • Bridging loans for owner-occupiers

  • Loans for new home construction or new dwellings
    (This protects the supply pipeline and avoids slowing down new builds.)

APRA also confirmed that other macroprudential tools remain unchanged:

• Serviceability buffer: 3%

• Counter-cyclical capital buffer: 1%

Will this affect my ability to borrow?

If you’re an owner-occupier in Wollongong or the Illawarra, it’s unlikely you’ll feel an immediate impact — most lenders are well under the cap for this type of lending.

However, if you’re an investor, particularly one looking to maximise borrowing capacity, you may see some shifts as lenders adjust their credit appetite over the coming months.

Possible outcomes:

• Some lenders may tighten their DTI thresholds.

• Others may become more selective with higher-DTI investor applications.

• Borrowers relying on aggressive borrowing strategies may need to reassess structure or lender selection.

Why this matters in today’s market

The combination of:

• Falling interest rates

• Rising property prices

• Strong investor appetite

• A shift in the financial risk cycle

…means the lending landscape is evolving quickly.

High household debt has long been a structural risk in Australia, and APRA is signalling that maintaining lending discipline is critical as credit conditions loosen.

For home buyers and investors, especially in fast-moving markets like Wollongong, Thirroul, Shellharbour and the broader Illawarra, understanding these changes early can help you plan your next move with confidence.

What to do next

Whether you’re hoping to purchase your first home, upgrade, or expand your investment portfolio, it’s important to get strategic about your loan structure.

At Haus of Loans, we can help you:

• Understand how DTI limits may apply to your situation

• Maximise your borrowing capacity within the new rules

• Compare lender policies (which now matter more than ever)

• Position your application to meet both lender and APRA expectations

With more lending changes expected over the next 12 months, getting tailored guidance early can put you on the front foot.

Considering a purchase or refinance? Let’s talk.

If you want clarity on how these APRA changes could affect your borrowing power, reach out anytime.

We’ll walk you through your options and help you secure finance that supports your goals without overexposing your finances.