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Activation of debt-to-income limits as a macroprudential policy tool
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This image shows APRA's contact details: AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY - 1 Martin Place (Level 12), Sydney, NSW 2000 - GPO Box 9836, Sydney, NSW 2001. Telephone: 02 9210 3000, Website: www.apra.gov.au. Australian coat of arms - APRA

To: All authorised deposit-taking institutions (ADIs)


In June 2022, the Australian Prudential Regulation Authority (APRA) wrote to Authorised Deposit-taking Institutions (ADIs) on new requirements set out in APS 220  Attachment C – Macroprudential Policy: credit measures that would apply from 1 September 2022.1 This was to enable APRA to activate those measures in a timely manner and with minimum business disruption, when needed. In August 2025, APRA engaged with regulated entities on implementation aspects of different macroprudential tools to manage housing lending risks.

Today, APRA is announcing the activation of debt-to-income (DTI) lending limits for residential mortgage lending, which is outlined in APS 220  Attachment C. Effective 1 February 2026, the limits will allow authorised deposit-taking institutions (ADIs) to lend:

  • Up to 20 per cent of new investment loans funded at DTI greater or equal to six times
  • Up to 20 per cent of new owner-occupied loans funded at DTI greater or equal to six times

APRA’s macroprudential policy tools are aimed at mitigating financial stability risks at a system-wide level to promote a safe and stable financial system and currently high household indebtedness is a key vulnerability in the Australian financial system. 

While lending standards remain sound, housing credit growth has increased to above its post-GFC average and housing prices are strengthening from already high levels. In previous episodes, easing financial conditions often coincided with a pick-up in riskier lending, including an increase in high DTI lending. Currently, high DTI borrowing has begun to increase, albeit from low levels, driven by investor borrowing activity. Investor activity, while typically not riskier in terms of default rates, can amplify housing lending and price upswings that can impact financial stability. 

Given these dynamics, aggregate household indebtedness could increase further, and other housing-related vulnerabilities could build. With the support from the Council of Financial Regulator (CFR), APRA acts today to contain the potential build-up of housing-related vulnerabilities. 

The key implementation details are provided in the Annex A and more information is included in the information paper released today at: Activating debt-to-income limits as a macroprudential policy tool.

Together with other members of the CFR, APRA will continue to monitor and assess the risks in the residential mortgage lending market and consider additional measures, if needed.

Should you have any questions in relation to the implementation aspects of this policy, please email dataanalytics@apra.gov.au and address to: Manager, Macroprudential Policy team.

Yours sincerely
John Lonsdale
Chair, Australian Prudential Regulation Authority

Annex A - Key implementation details

Details
Applicable Prudential StandardAPS 220 Credit Risk Management – Attachment C Macroprudential Policy: credit measures
Applicable ADIs

This policy applies to all ADIs conducting residential mortgage lending in Australia.

Please refer to Reporting Standard ARS 223.0 Residential Mortgage Lending (ARS 223.0) – section ‘Application and commencement’ for more details.

Debt-to-income (DTI) ratioAs defined in ARS 223.0
Scope

New loans funded – secured by residential property in Australia

Please refer to ARS 223.0 section B for detail

Exemptions

Entities that report on form 923.5 should treat following residential mortgage loans (sub-categories) as exempt from the DTI limits:

  • Finance for the construction of new dwellings, as defined in ARS 701.0
  • Finance for the purchase of newly erected dwellings, as defined in ARS 701.0
  • Bridging finance, as defined below.

Bridging finance is owner-occupied lending funded during a period where borrowers intend to transfer their principal place of residence and in the interim also have an existing owner-occupied loan. APRA expects this temporary arrangement to be completed within twelve months of origination.2

Proportionality

Based on ADIs’ Significant Financial Institution (SFI) classification.3

For SFIs:

  • Quarterly measure
  • Expected to report on the ad-hoc reporting form ARF 923.5 – Residential Mortgage Information Request, on a monthly and full form basis.

For non-SFIs:

  • Four-quarter rolling measure
  • Flexibility to choose:
    • not to carve out exempted loans and no additional reporting is needed (a default option);
    • or to carve out exempted loans, hence entities are expected to report on the ad-hoc collection form ARF 923.5 – Residential Mortgage Information Request, on a quarterly and partial form basis.

The calculations are provided in the file below:

Implementation Details - DTI limitPDF346.56 KB
Published 27 November 2025

Reporting forms
  • The primary reporting form is the formal collection of ARF 223.0, and all ADI mortgage lenders currently report on this form.
  • The supplementary reporting form is the ad-hoc collection of ARF 923.5, which captures exempted loan sub-categories
Footnotes

1Letter to ADIs - Macroprudential Policy credit measures

2Also see Prudential Practice Guide APG 112 Standardised Approach to Credit Risk – paragraph 10 for guidance

3SFIs are defined in Prudential Standard APS 001 Definitions. Please see the current list of SFIs here - Significant financial institutions register.

2025

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