Will new APRA rules make it harder to get a home loan?
After a rise in high debt-to-income lending, the regulator has cracked down.
Last week, financial regulator APRA released its review of financial system risks. In it, APRA raised concerns about the rising level of higher risk lending.
Today (27 November), it announced it'll be cracking down on high debt-to-income loans to reduce those risks.
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What are the changes?
From 1 February 2026, a maximum of 20% of a bank's loans can be high debt-to-income.
High debt-to-income loans are classified as those which are six times your income or more, and the limits will apply separately to owner occupier loans and investor loans.
For instance: if you earn $100,000, six times this amount is $600,000. If you wish to borrow more than this, the bank you apply with may not approve your loan if they've already reached their 20% limit.
It's almost important to note this new rule doesn't apply to non-bank lenders.
Will this make it harder to get a home loan?
Maybe, maybe not.
APRA admits it's likely to have more of an impact for investment borrowers, as they typically borrow at higher debt-to-income ratios.
But it currently believes there's only a small handful of lenders near the 20% limit at the moment for investors.
Why has this been announced?
APRA regularly conducts reviews to make sure the financial system is working as it should. In its latest review it found that while overall bank lending standards were sound, there had been a rise in riskier lending.
In particular, borrowers taking out loans of more than 6x their income.
As interest rates have fallen, housing credit growth has risen and so have house prices. As high debt-to-income is only expected to increase, APRA is concerned about what could happen to the banking sector and household finances if it doesn't step in.
So the latest rules are coming in as a way to "pre-emptively contain [the] risks".
APRA has also said it could consider investor-specific limits if it sees further rising risks. Investment loan limits were last in place from 2014 to 2018.
Sources
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