APRA’s New Cap on High‑Risk Loans: What It Means for Property Dollar Users

Australia’s property market has been running hot, and regulators are starting to worry.
On 27 November 2025 the Australian Prudential Regulation Authority (APRA) announced new restrictions that limit the share of high‑risk loans that banks can write.

We also show why using Loan Optimiser in the Property Dollar app can help you stay on top of your borrowing costs.

Why APRA stepped in

Australia’s housing affordability problem is well-documented.
According to The Guardian article, a recent report found that affordability is “now at its worst on record” and a typical household needs to dedicate nearly half of its pre‑tax pay to service the average new mortgage.
With a cost‑of‑living squeeze and wage growth that is failing to keep up with inflation, many borrowers are taking on bigger debts to secure a home.

Investor activity has also surged. Regulators noted an explosion in lending to landlords: property investors account for two in five new loans, and the value of investor lending jumped 18 % in the September quarter.

This investor resurgence pushes up prices, making it even harder for first‑home buyers to compete.

Debt levels are rising faster than incomes. In many cases, borrowers are taking on loans worth more than six times their annual income.
Such debt‑to‑income (DTI) ratios are considered high risk because they leave borrowers vulnerable to rate rises or income shocks.
Against this backdrop of rapid price growth, investor dominance and stretched household budgets, APRA decided to tighten the rules on bank lending.

What the new rules say

APRA’s announcement imposes a 20 % cap on the proportion of new home loans that banks can make to borrowers whose debt‑to‑income ratio is above six.

Put simply, if your mortgage is worth more than six times your annual income, it will count towards your lender’s quota of high‑risk loans.

From February 2025, banks will have to ensure that such loans do not exceed 20 % of their total new lending. APRA said it was prepared to intervene further if lending standards deteriorate or macro‑financial risks rise.

The regulator has not imposed hard debt‑to‑income limits before. It last intervened a decade ago, introducing “speed limits” on high‑risk lending that contributed to a downturn in house prices.
This time, the cap is designed as a “guardrail for stability, not a handbrake on demand”.

APRA itself emphasised that the cap could be tightened or broadened to include other categories – such as investor-specific limits – if risks keep building.
Treasurer Jim Chalmers called the restrictions “prudent steps to maintain responsible lending” and said they would also help more people get into homes.

How many loans will be affected?

The 20 % cap might sound strict, but data suggests most lenders are nowhere near the limit.
APRA’s own figures show that about 10 % of new investor loans and around 4 % of new owner‑occupier loans have debt‑to‑income ratios above six.
These shares are well below the new 20 % cap, which means banks currently have headroom before they need to restrict lending.
That’s why some analysts argue the policy is unlikely to bind in the short term.

Why affordability may not improve

The new cap is not designed to cool the market.
It aims to reduce the proportion of borrowers taking on dangerously high levels of debt, but it won’t necessarily slow price growth or make homes more affordable.
This has drawn criticism from some quarters.

Meanwhile, Eliza Owen, head of research at property data firm Cotality, said capping high‑risk loans was a good preventative move given that investor concentration was back at 2010s levels.
However, she noted that it was more likely to affect highly leveraged investors rather than owner‑occupiers.
Owen also emphasised that regulators can only do so much for housing affordability; deeper reforms such as changes to capital‑gains tax concessions would be needed.

What this means for borrowers and investors

If you’re planning to buy a home or have an existing loan, here’s how the new cap might affect you:

• Availability of high‑DTI loans: Banks will be more selective about lending more than six times your income.
  If you need to borrow at that ratio, you may need to show stronger repayment capacity or larger deposits.
• Investment loans: Since investors already account for two in five new loans, and high‑DTI lending often funds investment properties, the cap may reduce the supply of investor loans.
  However, because current high‑DTI lending is below the cap, there may not be an immediate squeeze.
• First‑home buyers: APRA hopes the policy will “maintain responsible lending” and help first‑home buyers by curbing the riskiest lending.
  In practice, though, the rule does not stop investors with strong incomes from outbidding owner‑occupiers.
  Greens senator Pocock said first‑home buyers would still be priced out unless deeper reforms occur.
• Potential future tightening: APRA has signalled willingness to introduce investor‑specific limits or other measures if risks continue to rise.
  Borrowers should expect that lending standards may tighten further.

Lessons for Property Dollar users

The new APRA rule underscores a simple truth: borrowing too much relative to your income can be dangerous.
With interest rates likely to remain elevated in the medium term, high debt levels can quickly become unsustainable if your circumstances change.
Rather than chasing the maximum loan you can obtain, focus on securing a loan that fits comfortably within your budget.

Here are some practical steps you can take to protect yourself:

1. Know your debt‑to‑income ratio.
   Calculate your total housing debt and divide it by your gross annual income.
   If the ratio is above six, you’re in the high‑risk category targeted by APRA.
   Even if your bank is willing to lend at that level, consider whether the repayments would still be manageable if rates rise.
2. Use Loan Optimiser to compare deals.
   The Property Dollar app includes a Loan Optimiser tool that lets you input your current loan details, compare interest rates across lenders, and model how changing rates, terms or loan sizes affect your monthly repayments.
   With new rules making banks more cautious about high‑DTI lending, it’s a good time to review whether you have the best possible rate and structure for your situation.
3. Stress‑test your repayments.
   As part of your loan review, model scenarios in which interest rates rise by 1–2 percentage points or your income temporarily drops.
   Can you still meet repayments without dipping into savings?
   If not, consider reducing your loan amount, extending the term, or consolidating other debts.
4. Build a buffer.
   Aim to keep at least 3–6 months of living expenses in a readily accessible savings account.
   A cash buffer gives you breathing room if rates rise or income falls.
   It also helps you maintain your credit score in tough times.
5. Keep an eye on policy changes.
   APRA may tighten lending further if high‑DTI lending doesn’t slow.
   Subscribe to news updates within the Property Dollar app or sign up to our newsletter to stay informed.

Putting it all together

The latest APRA rules serve as a warning sign more than a blockade.
They reflect regulators’ growing concern that high levels of debt could jeopardise financial stability if interest rates rise or the economy slows.
At the same time, the cap is unlikely to substantially change borrowing conditions in the short term because banks’ high‑risk lending already sits below the new threshold.
This means that the housing affordability crisis — where a typical household must dedicate nearly half of its pre-tax income to service a mortgage — is unlikely to be solved by this measure alone.

For Property Dollar users, the takeaway is clear: be proactive about your loan.
Use the Loan Optimiser to assess whether your current mortgage rate and structure are still the best fit.
If you’re considering a new loan, run different scenarios to see how much you can afford without pushing your debt‑to‑income ratio into dangerous territory.
And don’t assume that regulatory caps will shield you from the risks of over‑borrowing.
Ultimately, the safest strategy is to match your borrowing to your personal financial capacity and to build safeguards in case conditions change.

Disclaimer: This article is provided for general information only and does not constitute financial advice.
You should consider your personal circumstances and seek independent professional advice before making any financial decisions.