APRA tightens home loan lending limits making it tougher to get a mortgage in 2026

Banking regulator APRA has ordered lenders to limit how much they offer to home loan borrowers in a move to rein in runaway house prices fuelled by the recent return of property investors.

On Thursday, the Australian Prudential Regulation Authority said that from February 1 residential home loan lenders must not lend more than 20 per cent of their total new lending to borrowers that need to take on levels of debt more than six times their income.

“Rising indebtedness has in the past often been associated with an increase in riskier lending and rapid growth in property prices,” APRA chair John Lonsdale said.

“We will consider additional limits, including investor-specific limits, if we see macro-financial risks significantly rising or a deterioration in lending standards.”

Federal Treasurer Jim Chalmers backed the changes and said they would help improve housing affordability. “These rule changes are an important way for the regulator to reduce risk in our economy, but these efforts will also help when it comes to getting people into homes,” Dr Chalmers said.

Investor lending jumped 17.6 per cent in the September quarter, while total new housing lending grew 9.6 per cent.

APRA describes the limit as a debt-to-income (DTI) limit and said it would apply separately to owner-occupier and investor lending. It would also exclude bridging loans for owner-occupiers and loans for the purchase or construction of new dwellings.

Markets react

Mortgage brokers including David Thurmond the owner of Mortgage Choice in Berwick, Victoria, suggested the changes were designed to slow down the rush of lending to property investors, rather than hamper owner-occupiers.

“The changes will only impact those clients who are multi-property investors, I don’t think it will impact first home buyers or upgraders. So most people trying to borrow money won’t notice anything,” said Mr Thurmond.

The mortgage arranger added that most first-home buyers, or owner-occupiers hardly ever borrow more than six times their income as banks’ existing lending rules will not permit it.

“Whereas a client coming back (to Mortgage Choice) for their third or fourth investment property are the ones that might have issues,” said Mr Thurmond. “Or a first time investor with a car and personal loan might have issues as the extra unsecured debt will impact their assessment.”

The changes wouldn’t make much difference to house prices and APRA or policymakers in Canberra could also tweak them in the future, according to Mr Thurman.

Others including Monash University lecturer and economist Zac Gross criticised the changes, as over the top, given the Reserve Bank’s most recent Financial Stability Review didn’t suggest there was much stress in the mortgage market.

“Right now, investor lending—the segment growing fastest—has only about 10 percent of its new loans in the high-DTI bucket,” Mr Gross wrote. “Some individual banks may push closer to the limit, but the system as a whole is nowhere near the point at which the cap bites.”

Exiting rules mean banks must already apply variable mortgage rate stress tests for all new borrowers. This means the banks must be satisfied a new borrower can afford to pay 3 per cent above the existing loan rate as a safety buffer in case the central bank suddenly pushes benchmark rates higher.

Sharemarket investors in the big banks also shrugged off APRA’s changes on Thursday. Australia’s largest lender the Commonwealth Bank adding 0.2 per cent to $153.79. Elsewhere, National Australia Bank and Australia & New Zealand Bank both edged slightly higher. While Westpac dropped 0.2 per cent to $37.78. Specialist mortgage lender Australian Finance Group lost 0.7 per cent to $2.35.

The benchmark S&P/ASX 200 Index traded fractionally lower at 8,602 points.