By Will Kiln | Published 14 October 2026 | Last Updated 14 October 2026
Interest rates, lender policies and market data referenced in this article are current as at October 2026. The RBA cash rate is 4.60%. Rates and policy change frequently — contact us for the latest figures.
Most borrowers have never heard of the debt-to-income cap. Then they get declined by it.
In November 2025, APRA announced that from 1 February 2026, authorised deposit-taking institutions — banks, credit unions, mutuals — could write no more than 20% of their new residential mortgage lending to borrowers with a debt-to-income ratio of six or above. Owner-occupier and investor portfolios are measured separately, quarterly.
The serviceability buffer stayed where it was, at three percentage points. So borrowers now face two independent constraints rather than one.
Here's what it means in practice.
What the DTI ratio actually measures
Total debt divided by gross annual household income.
Total debt means everything: your mortgage or mortgages, investment property loans, car loans, personal loans, and the full limit on credit cards — not the balance.
Gross income means before tax, and lenders shade some income types. Rental income is commonly counted at 70–80% of the actual figure.
A household on $280,000 gross with a $1.6m mortgage, a $400,000 investment loan, a $45,000 car loan and $40,000 of card limits has total debt of $2.085m and a DTI of about 7.4. Comfortably over the line.
Note how easily the number climbs in Sydney. On the Lower North Shore, a professional couple on good incomes with a single owner-occupied property can land at six or above without any sense of having overextended. The cap isn't aimed at them specifically, but it catches them.
The part that surprises people: it's a quota
This is what makes the DTI cap unlike any other lending rule.
The serviceability buffer is a test you pass or fail on your own merits. The DTI cap is a limit on the lender's book. If a bank has already written its 20% allocation for the quarter, an application at 6.2x gets declined — even if the same application would have been approved comfortably eight weeks earlier.
Two consequences follow:
1. Timing matters. Early in a quarter, lenders have room. Late in a quarter, they're managing to a number. This is not something any lender will say out loud.
2. Lender selection matters more than ever. Banks are at different points in their allocation at any given moment, and have different internal appetites within the cap. There's no public dashboard for this — it comes from being in the market daily.
Within the limit, lenders retain full discretion to lend to creditworthy high-DTI borrowers in line with their own risk appetite. Some choose to use the headroom. Others sit well below it.
Does it apply to refinancing?
Yes. APRA granted exemptions for owner-occupier bridging loans and for lending to purchase or construct new dwellings. Refinancing isn't on that list.
A like-for-like refinance — same balance, no additional borrowing — still counts as new lending on the incoming lender's book and still consumes DTI allocation if you're at six or above.
This is the mechanism that has quietly created a new class of borrower who can service their loan perfectly well but can't move it.
Four ways through
1. Reduce the debt side
The fastest lever is credit card limits. A $50,000 combined limit is $50,000 of debt for DTI purposes even at a zero balance. Cutting it to $10,000 removes $40,000 from the numerator, and it takes a phone call.
Clearing or reducing a car or personal loan does the same thing, more expensively. Consolidating short-term debt into the mortgage does not help DTI — the debt total is unchanged — though it may help serviceability.
2. Non-bank lenders
Non-banks aren't ADIs, so APRA's cap doesn't apply to them at all. For a genuinely high-DTI borrower with strong servicing, this is the most direct route open.
The trade-off is rate. Expect to pay a premium over a major bank. For many borrowers that premium is still cheaper than sitting on a revert rate, but it needs to be calculated, not assumed — and it should come with a plan to move back to an ADI once the DTI position improves.
3. Timing and lender matching
If you're marginally over six, a broker who is writing loans across multiple lenders every week has a reasonable sense of who has appetite this month. That's not a guarantee, but it beats applying blind — particularly given that each unsuccessful application leaves an enquiry on your credit file.
4. Reprice instead of refinance
If you can't move, negotiate where you are. A retention discount on your existing loan requires no new credit assessment, so the DTI cap is irrelevant to it. For high-DTI borrowers, this is frequently the best available outcome — and it's free.
Is the cap going to be relaxed?
APRA framed the measure as pre-emptive, introduced while high-DTI lending was still a small share of the market, to prevent risk building rather than to correct it. It's a macroprudential tool, which means it's designed to be adjusted as conditions change — the serviceability buffer has been moved before, and the counter-cyclical capital buffer is reviewed regularly.
Planning on the assumption that it will loosen soon isn't a strategy. Planning to improve your DTI position over the next 12 months is.
Frequently asked questions
What is a debt-to-income ratio?
Total debt divided by gross annual household income. Total debt includes all loans plus the full credit limit on cards, not the outstanding balance.
Is six times income a hard limit?
No. Lenders can still write loans at or above six times income — they just can't let that lending exceed 20% of their new mortgage volume, measured quarterly and separately for owner-occupiers and investors.
Does the DTI cap apply to refinancing?
Yes. APRA's exemptions cover owner-occupier bridging loans and lending for new dwellings. A refinance counts as new lending on the incoming lender's book.
How can I lower my DTI before applying?
Reduce credit card limits, pay out or reduce car and personal loans, and check that all income — including rental and bonus income — is being counted at the highest level your lender's policy allows.
Do non-bank lenders have to follow the DTI cap?
No. The limit applies to APRA-regulated ADIs. Non-bank lenders sit outside it, which makes them an option for high-DTI borrowers, usually at a higher rate.
Not sure where your DTI sits? We'll calculate it properly — including the credit limits people forget — and tell you which lenders have appetite for your profile right now.
This article provides general information only and does not constitute personal financial advice. Rates, costs and savings are indicative and will vary based on your individual circumstances and chosen lender.
Cumulus Capital Pty Ltd (ABN 16 695 377 229), Credit Representative Number 577081, is authorised under Australian Credit Licence Number 389328.