APRA’s New 2026 Debt-To-Income Rules: What Borrowers and Property Investors Need to Know

From February 2026, major changes are coming to the lending landscape in Australia. The Australian Prudential Regulation Authority (APRA) has announced a new limit on high debt-to-income lending, a measure designed to curb riskier home loans and maintain stability in the financial system.

While this rule applies to banks and lenders, its effects will be felt directly by property investors, homebuyers, and anyone planning to borrow in 2026 and beyond. In this article, we break down what the rule means, why it has been introduced, and how borrowers can prepare.

Understanding The New Debt-To-Income (DTI) Cap

APRA’s new framework restricts the proportion of home loans that lenders can issue to borrowers whose total debt exceeds six times their annual household income. These are categorised as high debt-to-income (DTI) loans.

From February 2026, lenders will be required to keep high-DTI loans to no more than 20 per cent of all new lending. Importantly, this 20 per cent threshold applies separately to owner-occupier loans and investor loans, giving APRA more control over risk concentration in each category.

High-DTI loans already exist in the market, but this formal limit introduces a cap that lenders cannot exceed. The rule applies to newly written loans, not existing mortgages.

Why APRA Is Introducing New Debt-To-Income (DTI) Cap? 

The decision to activate this cap is driven by several economic indicators. Lending volumes have been climbing, investor borrowing has increased from a low base and falling interest rates have encouraged higher levels of household debt.

APRA considers high-DTI loans to be riskier, as heavily leveraged borrowers are more exposed to changes in interest rates, employment conditions, rental income fluctuations and economic cycles.

The regulator has emphasised that this measure is not intended to restrict lending immediately; instead, it is a guardrail to ensure lending standards remain prudent. Put simply, APRA wants to act early, before riskier lending patterns become embedded in the system.

How The APRA DTI Rule May Influence Borrowing Capacity

Borrowing capacity is expected to tighten for a segment of the market, particularly for investors with multiple properties or limited surplus income. However, APRA has not yet provided a clear guideline or examples on how investment income will be treated in the Debt to Income (DTI) calculation. While the APRA framework refers to gross household income when applying the six-times ratio, we have assumed net rental income for our examples below to give a more realistic illustration of how DTI may operate in practice.

Example 1: Rental Income Helps a Borrower Stay Under the DTI Limit

Sarah earns a salary of $150,000 a year and owns one investment property valued at $700,000 with a loan of $400,000. The property generates annual rent of $38,000. After typical rental expenses, Sarah’s net rental income is around $26,000.

• Her total annual income is: $150,000 salary
• $26,000 rental income = $176,000

Her total debt is the $400,000 investment loan.

• Her DTI is therefore: $400,000 ÷ $176,000 = 2.27

This places Sarah well below the DTI limit of 6. If Sarah applies for another loan, it will not fall into APRA’s high-DTI category. Lenders can approve her application under normal lending settings without using up their limited allocation of high-DTI loans.

In Sarah’s case, the rental income significantly improves her overall affordability and reduces her DTI, meaning she is unlikely to be affected by APRA’s new 20 per cent cap.

Example 2: Borrower Falls Above DTI 6 Even After Including Rental Income

Jim earns $200,000 and owns three properties with total loans of $1.8 million. His two investment properties generate $65,000 in gross annual rent. After typical rental expenses, his net rental income is about $45,500.

• His total annual income is: $200,000 salary
• $45,500 net rent = $245,500

His DTI is: $1,800,000 ÷ $245,500 = 7.33

Even after including rental income, Jim still exceeds the DTI threshold of 6. This places any future borrowing in the high-DTI category, meaning lenders will treat him as part of a restricted allocation. He may still qualify under servicing calculators, but lenders may decline or reduce the amount they are willing to lend because they are limited to issuing only 20 per cent of their loans to borrowers with high DTI.

How APRA’s New DTI Rules Could Impact the Australian Property Market

Any constraint on higher risk borrowing naturally shifts market behaviour. Some possible flow-on effects include:

• A moderating effect on investor-driven price growth in certain suburbs
• Greater competition among investors for lower-gearing, higher-servicing deals
• Increased scrutiny on rental income, vacancy risk and cost of living
• Higher demand for buyers with stronger incomes rather than stronger equity
• More conservative credit policies across the major banks
• More demand on positively geared property market 

While the rule is unlikely to cool the market dramatically on its own, it will place downward pressure on the most leveraged segments of the market.

How APRA’s 2026 Debt to Income (DTI) Cap Affects SMSF Loans and Trust Borrowing for Property Investment

Many Investax clients use trusts or self-managed super funds (SMSFs) to purchase long-term investment properties, and APRA’s new Debt to Income (DTI) cap will influence how these structures borrow. SMSF loans and trust loans already sit within more specialised lending frameworks, meaning any change to borrowing rules can have a greater impact on property investors using these structures.

SMSF Loans

SMSF property lending already has stricter servicing requirements, and income inside an SMSF is assessed differently from personal income. While APRA’s Debt to Income (DTI) limit does not apply directly to SMSFs, many lenders may still adopt internal DTI-style models to control lending risk. This can make SMSF borrowing more difficult for funds with lower contributions, smaller balances or limited rental income, particularly when seeking finance for residential investment properties.

Trust Borrowing

For discretionary trusts, unit trusts and family trusts, borrowing normally relies on the external income of the beneficiaries or guarantors. Under APRA’s new Debt to Income (DTI) rules, lenders may place greater weight on the total debt versus income position when assessing trust borrowing capacity. If the trust structure leads to higher gearing or insufficient supporting income, lenders may reduce the loan amount, request additional guarantees, or decline the loan altogether.

Specialist advice will be vital for SMSF and trust property investors to ensure their structures align with lending rules and to understand how the new DTI restrictions may affect future borrowing potential.

How Borrowers Can Prepare Before the Rule Takes Effect

Borrowers intending to secure finance in early to mid-2026 should consider taking steps now to strengthen their position. These include:

• Reviewing existing debt and consolidating or reducing liabilities
• Improving taxable income where possible
• Building buffers to support stronger serviceability
• Considering alternative lenders with different stress-testing approaches
• Avoiding over-reliance on rental income projections
• Securing pre-approval earlier and keeping it updated
• Structuring property purchases strategically through the right entity

Planning ahead will allow borrowers to navigate the tighter framework more easily.

What’s Next

APRA’s February 2026 Debt to Income (DTI) cap is one of the most significant shifts in lending rules in recent years. If you’re planning to borrow, refinance or invest in property within the next 12–18 months, now is the ideal time to reassess your borrowing capacity, tax structure and long-term strategy. It is best to speak with your finance broker early to understand how the new DTI limits may affect your lending options. If you need assistance, feel free to reach out to an Investax trusted adviser and we can refer you to experienced finance brokers who understand these changes. And if your current accountant isn’t experienced in investment property matters, maybe it’s time to give Investax a go. Our team can help you navigate the impact of APRA’s new rules and build a tax-efficient plan that supports your property goals.

Reference

APRA – Activating debt-to-income limits as a macroprudential policy tool

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