From 1 February 2026 new APRA Lending Rules: a debt-to-income ratio of six (6) times income or higher to 20% of new lending.
- Kammy
- Jan 28
- 3 min read
Countdown to 2026 Lending Rules: High DTI (≥6) loans will be capped—how can property investors prepare?
Follow us on LinkedIn for the latest industry updates and trending news.
From 1 February 2026, the Australian Prudential Regulation Authority (APRA) will introduce a major new macroprudential rule aimed at reining in high-risk lending in the housing market. Under the rule, banks and other authorized deposit-taking institutions (ADIs) must limit high debt-to-income (DTI) loans — those where a borrower’s total debt is six times or more of their income — to no more than 20 % of new lending in both the owner-occupied and investment segments.
While the change is targeted at system-wide stability, for property investors this shift is more than just a regulatory headline — it has real implications for borrowing strategies, tax planning and portfolio structure.
1. What “High DTI” Means for Investors
A debt-to-income ratio simply compares your total borrowings to your gross annual income. Since many property investors use tax-effective strategies such as negative gearing, their servicing income after tax can look stronger — but lenders calculate DTI using gross income and total debt levels, not after-tax cash flow.
As a result, it’s possible for an investor with strong tax-effective returns on paper to still fall into the “high DTI” category from a lender’s risk assessment perspective. In fact, Propertybuyer highlights that investors — particularly those with existing properties and high borrowing — are more likely than owner-occupiers to sit above the 6× income mark and therefore are more exposed to the new cap.
2. It’s Not a Borrowing Limit — It’s a Lender Allocation Limit
Importantly, APRA’s rule does not automatically reduce your theoretical borrowing capacity or change how lenders calculate serviceability (that is driven by buffers and rate-stress tests). Instead, the rule influences how many high-DTI loans a bank can hold relative to all new loans.
This means:
A bank can still approve a high-DTI loan, but only if that approval fits within its 20 % cap for the quarter.
If the cap is reached, the bank may restrict further high-DTI approvals, offer alternative loan structures, or defer applications.
Investors may need to be more flexible in lender choice, including considering non-ADIs (which are not subject to this cap).
Strategically, this reshapes where and how investors access credit rather than setting a hard borrowing ceiling.
3. What This Means for Your Tax & Accounting Plan
For investors, the impact is almost always best managed before you prepare your loan application — through careful accounting and tax planning:
• Income Structuring
Properly structuring income — including salary vs business distributions — can improve DTI outcomes when lenders assess gross income. It’s not about reducing tax at all costs but ensuring the income lenders see supports the borrowing profile.
• Trust and Entity Planning
Investors holding property through trusts or companies need to review how income flows and distributions are reflected in lending assessments. Poorly structured entities can distort DTI ratios even when tax outcomes are efficient.
• Borrower Profile Strengthening
Borrowers with clear, stable, and transparent income streams — including dual incomes or joint applications — are more likely to stay within comfortable DTI bands and avoid lender constraints.
• Asset & Liability Review
Reducing non-essential liabilities, increasing equity and lowering existing debt ahead of applications can meaningfully improve your DTI position — and in the eyes of lenders, your risk profile.
4. Short-Term vs Long-Term Impact
Right now, high DTI loans make up only a small share of lending, and the cap at 20 % means that for many investors, borrowing conditions may not feel immediately tighter.
However:
As interest rates change and borrowing capacity shifts, DTI ratios can climb quickly, especially for leveraged investors.
Lenders could tighten internal policies before the rule takes effect to manage risk, even if the cap isn’t binding yet.
Investors relying on multiple high-geared purchases or complex structures will need to plan ahead to avoid being crowded out of the “approved” quota by other high-DTI borrowers.
Source of information:
Liability limited by a scheme approved under Professional Standards Legislation
