Banks will only be allowed to issue up to 20 percent of new mortgages with a debt-to-income (DTI) ratio of six or more. The cap will apply separately to owner-occupier and investor loans.
APRA said the move aims to contain the build-up of housing vulnerabilities in the financial system.
“While overall bank lending standards remain sound, APRA has observed a pick-up in some riskier forms of lending over recent months as interest rates have fallen, housing credit growth has picked up to above its longer-term average and housing prices have risen further,” the regulator said.
It noted that a resilient labour market was contributing to a shift in the financial risk cycle.
“In particular, high debt-to-income (DTI) lending has started to pick up, albeit from a low base, driven by high DTI loans to investors,” APRA said.
“This is expected to increase further in this part of the cycle, and already high household indebtedness could increase further.”
APRA said it was acting now to prevent housing-related risks from high DTI lending, with support from the Council of Financial Regulators.
APRA Chair John Lonsdale said they would not wait for vulnerabilities to build before acting.
“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,” Lonsdale said.
Currently, the signs of a build-up in risks are mostly concentrated in high debt-to-income lending, especially to investors.
“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,” Lonsdale said.
Potential Unintended Consequences
However, the Real Estate Institute of Queensland (REIQ) urged caution following APRA’s move.REIQ CEO Antonia Mercorella said unintended consequences of this policy needed to be carefully monitored, especially in relation to property investors.
“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.”
She noted REIQ supports prudent lending, but cautions against measures that inadvertently penalise responsible investors and reduce housing availability.
Mercorella also highlighted that property investors had a higher average taxable income than non-investors.
“For example, in 2022-23, around 39 percent of Queensland property investors had taxable income of more than $100,000 compared with around 20 percent for all taxpayers,” Mercorella said.
“While on the surface this change appears modest, the risk lies in gradually squeezing investors out of the market at a time when Queensland desperately needs more rental supply.”
Mercorella said Queensland’s housing dynamics were sensitive to measures that disincentivised investors.
Average Income, House Prices
To put the lending caps in perspective, the average Australian earns about $2,010 per week. This equates to $104,500 per year as of May 2025, according to the Australian Bureau of Statistics (ABS).This means the average house costs more than nine times the average single income.
