Credit Policy vs Credit Appetite

Key takeaways

• Policy is written and testable; appetite is behavioural and inferred.
• Appetite shifts through pricing, turnaround times and exception rates before policy changes.
• A "policy" decline and an "appetite" decline look identical to the applicant.
• This is the main reason brokers track lender behaviour, not just lender rules.

What is the difference in practice?

Policy is the document. It states that the maximum LVR for an investment loan is a given percentage, that casual income requires a stated period of employment, that a particular postcode carries a lending restriction. A broker can read it, and an application either complies or does not.

Appetite is what the lender does with applications that comply. Two lenders with identical written policy will behave differently if one is trying to grow its book and the other has hit an internal concentration limit.

Appetite is expressed through the levers that do not require a policy rewrite: pricing, how generously exceptions are granted, how quickly files are assessed, and how hard the assessor looks for a reason to decline.

How does appetite show itself?

None of these are announced. They are inferred from a flow of applications, which is precisely why an experienced broker with volume across a panel knows things that are not written anywhere.

Why does appetite change?

Usually for reasons that have nothing to do with the borrower in front of you.

• Regulatory limits - the APRA cap restricting new lending at a debt-to-income ratio of 6 or above to 20% of new lending forces lenders to manage the flow of high-DTI loans across the whole book.
• Concentration - too much exposure to one postcode, industry or borrower type.
• Funding - a non-bank whose warehouse terms change adjusts appetite immediately.
• Capital - reallocation towards segments that consume less capital.
• Arrears experience - deterioration in a cohort tightens appetite for similar loans.
• Operational capacity - a lender drowning in applications throttles the front end.

The practical implication for a borrower is worth stating plainly: a decline is frequently about the lender's position, not about you. Which is why the response to one is to find a lender whose appetite fits, rather than to conclude you cannot borrow.

Frequently asked questions

Why did one lender decline me when another approved the same application?

Because policy and appetite differ. Lenders assess income types, security and structure differently, and they also vary in how much of that business they currently want. The same file genuinely can produce opposite outcomes.

Can I see a lender's credit policy?

Brokers have access to lender policy documentation through their aggregator, and much of it is summarised in broker-facing guides. Appetite is not documented at all - it is inferred from how the lender is behaving.

What is a policy exception?

An approval granted despite the application breaching a written policy rule, typically where compensating factors are strong. How readily exceptions are granted is one of the clearest indicators of current appetite.

Does the DTI cap affect whether I get approved?

It can. APRA limits the share of new lending written at a debt-to-income ratio of 6 or above to 20% of a lender's new lending, so a compliant high-DTI application may still be declined if the lender is managing its quota.

Related reading

• Why Borrowing Power Varies $200,000 Between Lenders
• APRA's DTI Cap Explained: The 20% Rule That Started February 2026
• Why Home Loan Applications Get Declined: The Top 12 Reasons

Sources

• Prudential Practice Guide APG 223 Residential Mortgage Lending — APRA
• Credit licensing: Responsible lending conduct (RG 209) — ASIC