DTI and APRA’s 20% cap on high debt-to-income loans

What a DTI of six actually triggers

Debt-to-income ratio is total debt divided by gross annual income, and a DTI of six is not a decline threshold. Since 1 February 2026 APRA has capped each authorised deposit-taking institution at 20 per cent of its new owner-occupier lending and 20 per cent of its new investor lending at a DTI of six or above, with the two portfolios measured separately. The limit binds the lender’s book. It is not a rule about you.

A bank can write your loan at 6.4 times income and remain perfectly compliant, provided loans like yours stay under a fifth of what it originates in the measurement period. What the cap changes is scarcity. When an allocation is finite it goes to the cleanest file, so the real effect of sitting above six is a shorter lender list, closer scrutiny of your income evidence and a slower conditional approval — not an automatic no.

This is the single most common error in published Australian coverage. Comparison tables that tell you one major bank stops at nine while another source puts the same bank at 7.5 are both describing a pre-February world, and at least one of them has recast a portfolio limit as an approval test. Appetite above six now moves with each lender’s remaining quota, which is why no static table stays right for long.

How the number is built, line by line

Take a $700,000 proposed loan, a $22,000 car loan balance, credit cards carrying $18,000 of limits and a $34,000 HECS-HELP balance. That is $774,000 of debt. On $129,000 of gross household income the ratio lands at exactly 6.0 times — which means a household most people would describe as comfortable sits precisely on the line.

Two entries in that list catch borrowers out. Credit cards count at their limit rather than the balance, so a card you never touch with a $15,000 limit adds $15,000 of debt. And a HECS-HELP balance generally counts as debt in the DTI calculation even where the same lender excludes the repayment from serviceability because the balance will clear shortly — the identical liability treated two ways in two tests at one bank.

The denominator is not your payslip total either. Bonus, overtime, commission and rental income are shaded before the division, commonly to 70 to 80 per cent for residential rent, so the lender’s ratio usually lands above the one you worked out at the kitchen table. Existing investment property debt counts in full while the rent behind it is discounted, which is why a second or third property moves DTI faster than anything else you can do.

The three exemptions that change what you should buy

APRA carved three categories out of the limit: finance for construction of a new dwelling, purchase of a newly erected dwelling, and bridging finance on a 12-month expectation. Loans in those categories sit outside the 20 per cent allocation entirely, so the same borrower at 6.3 times competes for scarce quota on an established purchase and competes for none of it on a build.

That lines up with the tax side. From 1 July 2027, the restriction on deducting rental losses against non-property income applies to established residential property, with newly constructed dwellings carved out. If you are weighing a house-and-land package against an existing three-bedder, the finance rules and the tax rules now lean the same way — a genuine planning point rather than a sales line, though it is not a reason to buy a new build you would otherwise avoid.

Why appetite above six moves week to week

Significant financial institutions are measured quarterly; smaller ADIs are measured on a four-quarter rolling basis. A large bank that has already spent most of its allocation late in a quarter behaves very differently from the same bank in the first weeks of a fresh one, and a smaller lender averaging across a year has room to be flexible in any single month. None of this is published anywhere.

The limit also applies to new lending only. Existing borrowers are never reassessed while they stay put, but a refinance is new lending and goes through the test again. If you have added a car loan, a dependant or an investment property since settlement, your DTI at refinance can sit well above where it was when the original loan was approved — and a sharper rate elsewhere is no help if the file cannot clear that lender’s appetite.

DTI and the serviceability buffer are separate tests

They measure different things and both have to pass. DTI is a stock measure: how large is the debt relative to income. Serviceability is a flow measure: what is left each month once repayments are calculated at an assessment rate and living expenses are floored against a benchmark. APRA reconfirmed the serviceability buffer at 3 percentage points in May 2026, and with the cash rate at 4.35 per cent most assessment rates now sit around 9 per cent.

The two tests fail different people. A couple on $200,000 with two dependants and heavy fixed commitments can be knocked out on residual cashflow at four times income. A single professional on $130,000 with no dependants and no other debt can clear a 9 per cent assessment rate comfortably at 6.5 times and still need a lender with quota left. Reading one result as though it explained the other is how borrowers end up fixing the wrong problem.

What actually moves your ratio in 30 to 90 days

Reducing limits beats reducing balances. Taking a $20,000 card limit down to $5,000 removes $15,000 of assessed debt the moment the lender confirms the reduction, which on $129,000 of income is roughly 0.12 off the ratio for no cash outlay at all. A card kept for points is usually the most expensive loyalty program in the household.

After that, clear small amortising debts rather than shaving the mortgage — a $9,000 car loan retired does more for both DTI and serviceability than $9,000 off a home loan balance. Then tidy the income evidence, because shading is applied to the denominator. And resist lodging with several lenders at once: every formal application registers an enquiry that stays on your file for five years, and none of them improve your odds.

Getting a file assessed above six times income

If your ratio lands above six, the useful work is sequencing rather than shrinking. Which lenders have room this month, which will take your variable income close to face value, whether the property falls into an exempt category, and whether a smaller loan or a different lender is the cheaper compromise. That mapping is what Azure Home Loans does before a credit enquiry is lodged, rather than after a decline.

The figures on this page are worked examples built from APRA’s published settings as at September 2026. They are not a calculation of your ratio and not a credit assessment — your own number depends on how one particular lender shades your income and counts your liabilities on the day it reads the file.