APRA’s decision to cap high debt-to-income (DTI) loans is aimed at curbing future risk rather than responding to current stress, according to industry leaders.
From 1 February 2026, banks will be limited to issuing no more than 20% of new loans to borrowers with a DTI of six times income or higher, with the cap applied separately to owner-occupier and investor mortgages.
“The MFAA supports sensible, risk-based regulation that maintains financial system stability, whilst ensuring consumer choice and competition is maintained across the mortgage market,” Pannek said.
“APRA’s announcement looks to be deliberately pre-emptive rather than reactive, aimed at curbing future risk rather than addressing any deterioration in lending standards.”
She noted that system fundamentals remain sound.
“We know APRA looks at the financial system as a whole. At present, property prices continue to show upward momentum, arrears remain low, unemployment is low, and most borrowers are managing their mortgages despite ongoing cost-of-living pressures. At the same time, investor lending is strengthening, supported by higher levels of household equity and easing interest rates.
“APRA’s decision reflects its assessment that high DTI lending, particularly investor lending, has picked up albeit from a low base and could contribute to vulnerabilities if left unchecked.”
MFAA expects limited short-term impact, saying most borrowers should not see immediate changes to credit access.
Pannek also highlighted that the cap will apply to different lending streams independently.
“This suggests a targeted intent, with concerns centred on investor lending risk," she said. "It will not apply to bridging loans for owner-occupiers and loans for the purchase or construction of new dwellings.”
The Real Estate Institute of Queensland (REIQ) has urged APRA to carefully monitor investor behaviour as the cap rolls out.
“APRA plays an important role in maintaining financial stability, and we recognise this measure is intended as a preventative safeguard against overly leveraged lending,” REIQ CEO Antonia Mercorella (pictured upper right) said.
“However, this is the first time a restriction has been imposed to a debt-to-income ratio, and it is essential that APRA keeps a close eye on its real-world impacts – especially for property investors, who are the backbone of Queensland’s rental market.”
Mercorella warned that reducing investor participation risks tightening already constrained rental supply.
“Queensland has a higher proportion of renters than the national average, and investors currently account for around two in every five new home loans in our state,” she said. “In simple terms, fewer investors means fewer rental properties, which ultimately pushes rents even higher for tenants already under pressure.”
“APRA’s pre-emptive limit on mortgage lending at a high debt-to-income ratio highlights that good lending practice should not be distorted by system-level controls," Ellis said. "At the margin, we see this policy announcement as slightly dovish for the interest rate outlook.”
“With macroprudential tools already in place, it will be harder to argue that a buoyant housing market requires tight monetary policy.”
Ellis noted that DTI limits operate across a borrower’s total debt – including HECS and Buy Now Pay Later – making them more likely to affect investors, younger borrowers and those with multiple loans.
Canstar data insights director Sally Tindall (pictured lower right) said the limit is more about drawing a boundary than reducing borrowing power today.
“APRA has long said loans with debt-to-income ratios of six times or more are risky. Now it’s putting a formal cap on them to set a benchmark for the industry,” Tindall said.
“At just 5.5% of all new lending, and no more rate cuts in plain sight, this new limit won’t impact the vast majority of borrowers at current rates, but we only have to look back four years to know that this risky type of lending can quickly climb over 20% in a low-rate environment.”
She added that the existing three-percentage-point serviceability buffer is currently doing most of the work in limiting borrowing power.
“For anyone planning to take out a mortgage in the coming months, it’s worth running the numbers now," she said. "If you’re edging close to six times your income, expect the bank to take a more conservative line.”
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