Australian property investors most exposed to new limit
The Australian Prudential Regulation Authority (APRA) has announced that it will limit high debt-to-income (DTI) home lending to contain what it sees as a build up of vulnerabilities in the financial system.
From 1 February 2026, banks and other authorised deposit-taking institutions (ADIs) will only be able to lend up to 20% of new mortgages at a debt-to-to-income ratio of six times or more.
The limit will apply to both investors and owner-occupiers. It will not apply to bridging loans for owner-occupiers and loans for the purchase or construction of new dwellings.
“APRA’s macroprudential policy tools are designed to mitigate financial stability risks at a system-level,” said APRA chair John Lonsdale. “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.
“At this point, the signs of a build-up in risks are chiefly concentrated in high DTI lending, especially to investors. By activating a DTI limit now, APRA aims to pre-emptively contain risks building up from this type of lending and strengthen banking and household sector resilience.”
An unsurprising move
The decision is far from a surprise.
With property investor loan growth eclipsing owner-occupier loan growth to now comprise 40% of the entire mortgage market, economists and analysts were anticipating a move from the regulators.
Just yesterday, NAB chief economist Sally Auld noted that in the three months to September 2025 alone, annualised investor lending surged by a walloping 20%.
“I do think it's quite possible that we see maybe some macroprudential regulation appear from APRA. There's certainly discussion in the broader market that could be coming down the pipe,” Auld accurately suggested.
It is not the first time APRA has intervened in the investor-lending market. Between 2014 and 2017, it imposed a 10% annual growth cap on investor loans and a 30% ceiling on interest-only lending to cool the market.
Lonsdale said that 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”.
He added: “Although broader risks are contained, we have seen in the past that they can build rapidly when interest rates are low or declining, borrowers extend themselves and competition among banks for new mortgage lending intensifies, which can lead to easing lending standards. We will consider additional limits, including investor-specific limits, if we see macro-financial risks significantly rising or a deterioration in lending standards.
Banks get the front foot
APRA’s announcement follows a number of preemptive moves from some of Australia’s biggest banks.
In October, Macquarie stopped the practice of lending mortgages to trusts and companies, a favoured strategy among property investors seeking to circumvent serviceability rules.
Last week, Commonwealth Bank announced its own restrictions on company and trust lending.
While neither bank cited regulatory pressure, these changes have effectively tightened each banks’ risk profile – now the market will wait to see which banks follow suit.
