APRA's DTI Cap Explained: The 20% Rule That Started February 2026

Key takeaways

• DTI = total debt ÷ gross annual household income. A $900,000 debt on $150,000 income is a DTI of 6.
• The cap applies to each lender's share of new lending, so timing within a quarter can affect your outcome.
• It binds hardest in Sydney and Melbourne, where prices relative to incomes push borrowers past 6.
• Reducing total debt — not just the new loan — is the most direct lever you control.

How is DTI calculated?

Total debt divided by gross annual household income. Total debt includes the new mortgage, any existing mortgages, personal and car loans, HECS-HELP in some lenders' calculations, and credit card limits.

Note that a $20,000 credit card limit adds $20,000 to total debt even at a zero balance — which can be enough to tip a marginal application over the line.

Why cap DTI at all?

Serviceability testing asks whether you can meet repayments today at a buffered rate. DTI asks a different question: how exposed you are to a long period of higher rates or an income shock.

Highly indebted borrowers cut spending sharply when rates rise, which transmits from the housing market into the wider economy. Limiting the share of new lending at high DTI, rather than banning it, preserves access for borrowers with genuine reasons to carry more debt while capping the systemic build-up.

What can you do if you are near the line?

• Cancel unused credit limits. The fastest lever, because limits count in full.
• Clear consumer debt before applying — a car loan reduces both DTI and serviceability capacity.
• Shop across lenders. Each manages its own quota, so a lender with room may approve what another declines.
• Consider timing. Lenders manage the ratio across a period, so appetite can differ between the start and end of a quarter.
• Reconsider the purchase price. Sometimes the arithmetic simply says the borrowing is too large relative to income.

This is one of the clearest cases for using a broker: knowing which lenders currently have appetite for high-DTI lending is not information published anywhere. Brokers wrote 76.7% of new residential loans in the December 2025 quarter, and policy navigation is a large part of why.

Frequently asked questions

Is a DTI above 6 an automatic decline?

No. Lenders can still write these loans, up to 20% of their new lending. A strong application with a high DTI may be approved, but you are competing for a restricted allocation.

Does HECS-HELP count in DTI?

Treatment varies between lenders. Some include the outstanding balance in total debt, others only the compulsory repayment in serviceability. It is worth asking, because on a large HECS balance the difference is material.

How is this different from the serviceability buffer?

The buffer tests whether you can afford repayments at about 3 points above your actual rate. The DTI cap limits how much total debt you carry relative to income. You must satisfy both, and they can bind independently.

Related reading

• The Borrowing Power Formula: Income, HEM, Buffers and Debts
• Why Home Loan Applications Get Declined: The Top 12 Reasons
• Cash Rate at 4.35%: What It Costs the Average Australian Mortgage

Sources

• Macroprudential policy settings and DTI limits, February 2026 — APRA
• Prudential Practice Guide APG 223 — APRA
• Mortgage broker market share, December 2025 quarter — MFAA