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APRA's debt-to-income limit: what it means for agents

Since 1 February 2026 banks can write no more than 20 per cent of new home lending at six times income. What that does to the top of your range.

By Archie Moran, Founder, NeuraCall

Published · 9 min read

Updated

Since 1 February 2026, every Australian bank has had a ceiling on how much of its new home lending can go to borrowers whose debt is six times their income or more. Almost no sales agent knows the rule exists. It sits directly under the offer at the top of your range, and it changes what a pre-approval is worth on the day you quote a number to a vendor.

This article lays out the rule, the first published numbers, the second squeeze from rates, and three things to change on Monday. It's general information for agents, not credit advice. Your purchaser's loan is their broker's job.

What APRA changed on 1 February 2026

On 27 November 2025 APRA, the prudential regulator for banks, announced a limit on high debt-to-income home lending. It took effect on 1 February 2026.

The rule: an authorised deposit-taking institution may write no more than 20 per cent of its new mortgage lending at a debt-to-income ratio of six times or more.

Three details matter for agents.

  • It's counted per bank, not across the system. Each lender manages its own share.
  • It applies separately to owner-occupier lending and investor lending. A bank has two books to keep under the line, not one.
  • It's measured quarterly. A lender that runs hot in one quarter has to run cool in the next.

Two kinds of loan are exempt: owner-occupier bridging loans, and loans to buy or build a new dwelling. The established home you're selling isn't exempt.

Source: APRA, "APRA to limit high debt-to-income home loans to constrain riskier lending", 27 November 2025.

How debt-to-income is counted

Debt-to-income is the borrower's total debt divided by their gross income. Six times or more is the line APRA draws. It's total debt, so a car loan or an investment loan already on the books counts alongside the new mortgage.

The rule doesn't stop any individual borrower from going above six times. Within the 20 per cent, banks keep their discretion to lend to creditworthy high debt-to-income borrowers under their own policies. What the rule does is make that slice a managed share, per bank, per book, per quarter.

What the scoreboard says so far

APRA's quarterly property exposures publication now reports the share of new lending written at high debt-to-income. In the December 2025 quarter, the last quarter before the ceiling took effect, 6.8 per cent of new loans funded were at six times income or more. The ceiling is 20 per cent.

The first two quarters since the ceiling took effect are out. In the March 2026 quarter, 6.4 per cent of new loans funded were at six times income or more: 3.9 per cent of new owner-occupier lending and 10.8 per cent of new investor lending. In the June 2026 quarter, released on 17 September 2026, it was 5.6 per cent: 3.7 per cent owner-occupier and 8.9 per cent investor. Such pressure as there's sits on the investor side. APRA notes the published series doesn't strip out the exempt loan categories, so it differs slightly from the measure it uses to police the limit; read it as the shape of the market, not the compliance score.

The June 2026 release shows 29.7 per cent of new loans were written at a loan-to-valuation ratio of 80 per cent or above, which in plain terms is a deposit of 20 per cent or less. That's a separate dial. It measures how thin the deposit is, not the income multiple.

Be honest with yourself about these numbers. Five point six against a ceiling of twenty means the system isn't pressed against the cap. This isn't a credit crunch and the market isn't about to seize. What has changed is that the ceiling exists, it's counted lender by lender, and the regulator publishes how much of the market is funded at the stretched end every quarter. What's new is the split by book, owner-occupier and investor, first published for the March 2026 quarter.

Source: APRA, Quarterly ADI Property Exposures, December 2025, March 2026 and June 2026 quarters, table 1c and the highlights releases.

The second squeeze: the buffer and three rate rises

Two other things sit on top of the ceiling.

First, the serviceability buffer. Every home loan is assessed at 3 percentage points above the rate the borrower is actually offered. A loan advertised at 6 per cent is tested at 9. The buffer has been at 3 points since 2021, and APRA confirmed it again in its System Risk Outlook of 21 May 2026.

Second, the cash rate. The Reserve Bank raised it three times this year, announced on 3 February, 17 March and 5 May 2026, a quarter of a percentage point each time, then held on 16 June and 11 August. The cash rate is 4.35 per cent. The next decision is announced on 29 September 2026.

Use announcement dates when you talk to vendors. The RBA's own statistics page lists the date each new rate takes effect, which is the day after the announcement. Vendors ring on announcement day.

Why this lands on the top of your range

Who borrows at six times income? Not the downsizer with cash from the last sale. Look first at the purchaser who reached the top of your range by borrowing everything a bank would give them. Not every top bidder is in that slice, but the stretched ones are, and the stretched ones are the ones who bid highest.

Now trace the mechanics of a subject-to-finance deal in Queensland or Victoria. The offer lands with a pre-approval attached. A pre-approval is a conditional letter, assessed on the day it's issued, under the rules and rates of that day. Formal approval only happens after the contract, when the lender assesses the actual loan under its policy at that time. If the rules or the rates moved between the two dates, formal approval can come back under the pre-approval. In New South Wales the cooling-off period does the same job as the finance clause: the shape of the failure is the same.

That's the offer that dies on day nineteen. The house didn't fail valuation. The purchaser's number didn't survive the second test.

What it costs the vendor

The purchaser's loan isn't your problem. Your vendor is.

In week one you gave her the big number at the kitchen table. She told her sister and the neighbours over the fence. In week three the contract crashed on finance. The next offer was real money, and it was under the number that fell over. She said the line every agent has heard: "We're not going under what we had."

Now you're conditioning a vendor down from a figure that was never funded. The price drop goes on the portal for everyone who watched the campaign. Days on market climb. The Top 100 agents in this country average 33 days on market according to REB, and every week you spend explaining a dead number is a week you aren't spending on the appraisals that went quiet or the next listing already sitting in your database.

The carryable idea: pre-approved isn't a yes. It's a date.

Three things to change on Monday

1. Stop asking "are you pre-approved?" Ask "when was it issued?"

Everyone says yes to the first question. The second one tells you what the letter was tested against. This year the test moved four times: the ceiling on 1 February, then rate rises announced on 3 February, 17 March and 5 May.

To the purchaser's broker: "When did this come through, and has it been re-run since May?" Two answers, one minute, and you know which offer is resting on a stale letter. Also read the "subject to" clause at the bottom of the letter. Most agents never do.

2. Price the vendor off funded sales, not asking prices

When you appraise, lean on sales that went unconditional after 1 February. A sale that went unconditional in January had its finance approved under the old rule. What the neighbour is asking tells you nothing about what a bank will write.

3. Know which offers are fragile before they reach the vendor

You can't see anyone's income and you shouldn't ask. But you can hear fragility. A deposit at 20 per cent or under. A long finance clause. "We're at our limit" said out loud at the open. That's the offer you don't let your vendor fall in love with before it's money.

The words to use

At the kitchen table, before you say the number: "There's an offer at the top of the range. Their approval is from before May, so right now it's a number, not money yet. I'll call it money when the bank writes it."

Then stay out of the rest. Their loan is the broker's problem, not yours. Hand that half over.

What to watch next

Put 29 September 2026 in your diary. That's the next cash rate decision, and your vendors will ring that afternoon asking what it does to their price. The honest answer is the same either way: nothing they can bank on until a bank writes it.

Watch APRA's quarterly property exposures release as well. Each one now prints the high debt-to-income share per book. December 2025 was the baseline before the ceiling, March 2026 the first quarter under it, June 2026 the second, and the September 2026 quarter is due in December 2026.

If the week you spend chasing a broker for a finance update is the week your own database goes quiet, that's the problem a follow-up system exists to solve. And if you're still catching up on the other regulatory change of 2026, Tranche 2 and what it asks of agents is the companion piece.

Sources

General information for real estate professionals. Not credit advice. Purchasers should speak to their lender or broker.

Frequently asked questions

Does the APRA limit stop purchasers borrowing six times their income?

No. It caps the share of a bank's new lending that can be at six times or more at 20 per cent, counted per bank and per book each quarter. Within that share, banks still lend to creditworthy high debt-to-income borrowers under their own policies.

What counts as debt in the debt-to-income ratio?

Total debt, not just the new home loan. Existing loans and other debts count against gross income.

Are new builds and bridging loans caught?

Loans to buy or build a new dwelling are exempt, and so are owner-occupier bridging loans. Established homes aren't exempt.

Does the limit apply to investors?

Yes, and it's measured separately for a bank's investor lending and its owner-occupier lending.

Is the market about to seize up?

The published numbers don't say that. In the December 2025 quarter, the last before the ceiling, 6.8 per cent of new loans were at six times income or more against a ceiling of 20 per cent. In the March 2026 quarter, the first under it, the figure was 6.4 per cent. In the June 2026 quarter it was 5.6 per cent.

How long is a pre-approval valid?

Every pre-approval letter carries an issue date, an expiry date and conditions. Read them. Ask the broker when it was issued and whether it has been re-assessed since the most recent rate rise, and leave the rest to them.

Should I ask a purchaser what they earn?

No. Ask when the pre-approval was issued and whether it has been re-run. Their income and their loan are the broker's business.

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