Quick answer
If a bank says your debt-to-income ratio is too high, it usually means your total debt limits, including the new loan, come to six or more times your gross yearly income. Since 1 February 2026 APRA has capped that kind of lending at 20 per cent of each bank's new loans. It isn't a ban, and non-bank lenders aren't bound by the cap, so options remain.
Key points
- DTI is the credit limits of all your debts divided by your gross annual income. Limits count, not balances.
- From 1 February 2026, banks can write no more than 20 per cent of new owner-occupier loans, and 20 per cent of new investor loans, at a DTI of six or more.
- Loans to build or buy a brand-new home, and owner-occupier bridging loans, are exempt from the cap.
- Non-bank lenders aren't subject to APRA's DTI limit, though they still apply their own credit policy.
- Trimming unused limits, consolidating debts and showing all your income can move the ratio before you apply.
“Your debt-to-income ratio is too high” is one of the more frustrating things to hear from a bank, mainly because it often comes from someone who can clearly see you pay everything on time. Here’s the short version. Since 1 February 2026, banks have been working under a cap on loans at six or more times the borrower’s income. A knock-back on those grounds usually means you’ve landed on the wrong side of that line at a bank that’s being careful with its allowance. It doesn’t mean you can’t afford the loan, and it rarely means the end of the road.
Below we unpack how the ratio is actually worked out, what APRA’s rule really says, and the moves that tend to get a deal over the line.
What is a debt-to-income ratio, exactly?
Your debt-to-income ratio (DTI) compares everything you owe with what you earn. APRA’s definition, which banks report against, is the credit limit of all debts held by the borrower divided by their gross income. Gross income here means verified, before-tax income, not counting compulsory super.
Two details catch people out:
- Limits, not balances. A credit card with a $25k limit counts as $25k of debt, even if it’s sitting at zero. The same goes for an unused redraw-style line of credit or an overdraft.
- Everything is in. Other home loans, investment loans, car and personal loans, credit cards, buy now pay later accounts and margin loans all get added up, along with the new loan you’re asking for.
So a DTI of six means your total debt limits, after the new loan, would be six times your yearly gross income.
What does APRA’s debt-to-income limit actually say?
APRA announced the limit on 27 November 2025 and it took effect on 1 February 2026. The key settings, from APRA’s announcement, are:
| Setting | What it means for you |
|---|---|
| Threshold | Loans at a DTI of six times income or more count as high-DTI |
| Cap | Up to 20 per cent of a bank’s new owner-occupier loans, and separately up to 20 per cent of its new investor loans, can be high-DTI |
| Exempt loans | Building a new dwelling, buying a newly built dwelling, and owner-occupier bridging finance while you move home |
| Who it covers | Authorised deposit-taking institutions: banks, credit unions and building societies |
| Discretion | Banks can still lend to creditworthy high-DTI borrowers within the cap |
APRA’s information paper was frank about the reason. High-DTI investor lending had climbed to “around 10 per cent of new investor loans” in the September quarter of 2025. APRA said the cap was unlikely to restrict owner-occupiers or first home buyers in the near term. So if you’re a property investor, or you already have a big home loan and want to add more, you’re the borrower this rule was really written for.
Why did one bank say no when another might say yes?
Because the cap is a portfolio limit, not a rule about you. Each bank decides how to ration its 20 per cent. Some leave plenty of headroom and approve high-DTI loans readily. Others set an internal ceiling below six times so they never get close. And a bank that’s had a busy quarter with investors may get tighter towards the end of it.
On top of the DTI test, every lender still runs a full serviceability assessment, including APRA’s buffer of three percentage points above the loan’s actual rate for banks. If you’re unsure how that works, our guide to loan serviceability explains it. A DTI decline and a serviceability decline are different problems with different fixes, so it’s worth asking the bank which one it was.
A worked example
Here’s an illustrative couple, not a real client:
- Combined gross income: $160k
- Existing home loan limit: $720k
- Car loan: $40k
- Two credit cards: $30k in combined limits, both paid off monthly
- New investment property loan requested: $280k
Total debt limits with the new loan come to $1.07m. Divide by $160k and the DTI is about 6.7. Their bank’s policy stops at six, so it declines, even though the couple have never missed a payment.
Now look at what changes the picture:
- They close one card and cut the other to $5k. That’s $25k off the total.
- The car loan has a small balance left and they pay it out from savings. That’s another $40k off.
- One partner’s regular overtime, which the first application left out, is documented with payslips and the latest income statement, lifting assessed income to $172k.
New total: $1.005m on $172k, a DTI of roughly 5.8. Same people, same property, a different answer. Not every file moves this neatly, but it shows how much of the ratio sits in limits and paperwork rather than true debt.
If your numbers are close to the line and you’d like someone to run them properly, tell us about your situation and we’ll look at where the ratio can move.
Six ways to get past a DTI knock-back
1. Trim the limits you don’t use
Unused credit cards, old store cards and buy now pay later accounts all inflate your DTI. Reduce or close them, and keep the written confirmation for the lender.
2. Consolidate the small stuff
Several car, personal and card debts can sometimes be rolled into one facility with a lower total limit and one repayment. That can help both DTI and serviceability. See our page on debt consolidation loans for how that’s done against property.
3. Show all of your income
Overtime, allowances, rental income, a second job or a side business all count if they can be evidenced. Self-employed borrowers are often under-assessed because the tax return shows the business after add-backs have been stripped out. A lender that understands self-employed home loans may read your income quite differently.
4. Look at the exempt categories
Loans to build a new home or buy a newly built one sit outside the cap, and so does owner-occupier bridging finance while you sell and buy. If your plans can fit one of those, a bank may have more room to say yes.
5. Change the lender type
Non-bank lenders aren’t covered by APRA’s DTI cap. APRA noted when announcing the limit that it has powers to apply these measures to non-APRA-regulated lenders but “has not used them to date”. Non-banks still check you can afford the loan, but many have policies built for borrowers with larger portfolios or complex income. Our guide to non-bank lenders covers the trade-offs, and the non-bank home loans page shows what we arrange.
6. Use short-term money with a clear exit
Sometimes the plan is to sell an asset, finish a build or let a debt run off within a year or two, and the DTI only looks high in the meantime. A private or short-term facility can bridge that window, provided the exit is realistic and written down. It’s not the right tool for every situation, and we’ll tell you plainly if it isn’t.
What should you avoid after a DTI decline?
- Applying everywhere at once. Every application can leave an enquiry on your credit file, and a cluster of them looks like trouble. Our guide on why applying everywhere backfires explains why.
- Leaving debts off the form. Lenders check your credit file and bank statements. An omitted debt turns a policy decline into a trust problem.
- Taking on new finance in the meantime. A new car loan before you reapply pushes the ratio the wrong way.
- Assuming the decline was about affordability. Ask the bank to confirm whether it was the DTI cap, serviceability or something else. The fix depends on the answer, and our guide on what to do if your loan is declined walks through the next steps.
Does a high DTI hurt investors more than home buyers?
Usually, yes. Investors tend to stack loans over time, so each new purchase adds a fresh limit on top of the existing ones while income rises more slowly. That’s exactly the pattern APRA was watching. Owner-occupiers with a single home loan and modest other debts rarely reach six times income unless incomes are low compared with local prices.
If you’re growing a portfolio, it pays to plan purchases around the ratio. That might mean paying down one loan before the next purchase, holding properties in a structure that suits lending, or using a lender whose policy fits investors. Our investment property loans page covers the options. For general background on how home loans and repayments work, Moneysmart’s home loan guide is a solid, independent read.
Turned down over your DTI? Let’s find a lender that fits
Sounds like you need a home or investment loan from a lender that looks at the whole picture, not just one ratio. Finding loans for borrowers the banks have knocked back is our bread and butter. Click below and see if you qualify.
The enquiry takes about a minute and there’s no credit check when you first get in touch, so your credit file stays untouched just for asking. We won’t send your details off to a pile of lenders either, so no flood of phone calls. One of our team will read what you’ve sent, look at your income, debts and plans, and give you a call to talk it through. Please fill the form in accurately, especially your debts and their limits, because that’s what lets us line up the right lender first time.
Frequently asked questions
What counts as a high debt-to-income ratio in Australia?
APRA's limit on banks kicks in at a DTI of six times gross income or more, so that's the line most lenders now treat as high. Plenty of banks have their own internal flags below that, and some non-bank lenders will go higher where the rest of the file is strong.
Does the DTI calculation use my credit card balance or the limit?
The limit. APRA's definition counts the credit limit of every debt, so a $20k card you clear every month counts as $20k of debt. Reducing or closing unused cards before you apply is one of the quickest ways to bring the ratio down.
Is the APRA debt-to-income limit a ban on high-DTI loans?
No. It caps how much of each bank's new lending can sit at six times income or more. That's 20 per cent of new owner-occupier loans and 20 per cent of new investor loans, measured separately. Inside that allowance a bank can still approve creditworthy high-DTI borrowers, so the answer can depend on how close a particular bank is to its cap.
Do non-bank lenders have to follow the APRA DTI cap?
No. The limit applies to authorised deposit-taking institutions such as banks, credit unions and building societies. APRA has said it has powers to extend macroprudential measures to other lenders but, when it announced the DTI limit in November 2025, it had not used them. Non-banks still assess affordability under responsible lending laws and their own policies.
Which loans are exempt from the DTI limit?
APRA excluded loans to build a new dwelling, loans to buy a newly built dwelling, and owner-occupier bridging finance where you're moving home and still hold your existing home loan. Those loans don't count towards a bank's 20 per cent allowance, although the bank still has to be satisfied you can afford them.
Will reducing my debts quickly fix a DTI knock-back?
It often helps, but timing matters. A closed card or paid-off car loan needs to show up on your credit file and paperwork before the lender sees it, so get written confirmation of closures. Talk to a broker before shuffling debts so you don't fix the ratio and then trip up serviceability or your credit file.