Alex Veljancevski, mortgage broker and founder of Sydney-based Eventus Financial, said several lenders are quietly pulling back from high-DTI loans, leaving even financially strong investors rejected for home loans.
New lending cap imposed by the Australian Prudential Regulation Authority (APRA), which formally took effect on 1 February, restricts banks from writing more than 20% of new loans to borrowers with debt more than six times their income.
According to Veljancevski, some banks are now already rejecting loan applications even of those who can comfortably afford the repayments.
“We're seeing investors who pass the bank's own serviceability assessment but the application still can't proceed because their total debt is above six or seven times their income," he said.
Mr Veljancevski noted that prior to APRA’s new lending cap, borrowers who could meet the 3% serviceability buffer would get approved even if their DTI would be above seven.
But it isn’t the case now.
Banks’ allocation for high-DTI loans shrinks
APRA’s clampdown came at a time when investor lending has been accelerating sharply.
The rule was announced in November 2025, just as the ABS reported investor home loans surged 17.6% and investment lending accounted for 40% of all new home loans in the September 2025 quarter.
While APRA has stated the cap is not expected to have a near‑term impact on most borrowers, it also warned that the limit is designed as a guardrail to contain riskier mortgage activity as investor credit growth climbs toward levels not seen since 2015.
As a result some lenders have already moved to tighten their own internal thresholds ahead of the cap.
"What a lot of people don't realise is that banks aren't waiting to hit the 20% ceiling before they act. Some have already quietly lowered their own DTI limits internally,” Mr Veljancevski said.
“So even though APRA's rule allows lending up to six times income, certain lenders are pulling back before they reach that threshold,” he added.
“The industry is moving faster than the regulation."
APRA limits hit investors hardest
APRA’s made clear that the cap applies separately to investor and owner‑occupier lending, meaning the investor segment could face tighter constraints sooner because their DTI ratios tend to run higher.
As market noted, the change is hitting hardest among investors who already hold multiple properties.
“Even where rental income comfortably covers repayments and a borrower's credit history is clean, a high aggregate debt figure relative to income can now be enough to stop an application,” Mr Veljancevski said.
Latest prudential data shows mortgages with DTI ratios between four and six have hit a six-year high, reaching more than $67 billion, nearly half of all new loans.
Beyond the now-in effect cap, the banking regulator emphasised it was prepared to consider further investor‑specific measures if high‑DTI levels continue to rise significantly.
Non-bank lenders provide viable alternative to investors
As APRA's rules apply only to authorised deposit-taking institutions (ADIs), Mr Veljancevski said investors can explore alternative financing options.
"Non-bank lenders aren't subject to the DTI cap, so for borrowers who are genuinely in a strong financial position but are being turned away by their bank, there are still real options available," he said.
According to the Australian Finance Industry Association, non-bank lenders held around 2.8% of Australia's residential mortgage market by the end of June 2025, but with banks tightening their DTI thresholds, Mr Veljancevski believes this figure is likely to grow.
However, he also cautioned that not every option will suit every borrower.
"It's not a straight swap,” he pointed out.
“Non-bank products can come with higher rates or different conditions, so you need to go in with your eyes open and get proper advice. But for the right borrower, it can absolutely be the right solution."
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