A debt-to-income (DTI) ratio measures a borrower’s total debt against their gross annual income, and Australian lenders use it as one of the fastest tests of whether a loan is affordable. From 1 February 2026 it also carries regulatory weight: APRA caps the share of new bank lending that can go to borrowers whose debt is six or more times their income.
This guide explains how lenders calculate DTI, what the new limits mean for your files, and where to turn when a well-qualified client sits above the threshold.
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How DTI is calculated in Australia
Australian lenders generally compute DTI as total debt across all liabilities, including the proposed home loan, divided by gross annual income before tax. A client earning $120,000 a year with $600,000 of total borrowing has a DTI of five. This differs from the monthly repayments-to-income formula used in the United States, so be careful translating American advice into an Australian file.
Lenders still run a separate serviceability assessment using net surplus income and APRA’s three per cent interest-rate buffer, so a client can pass serviceability yet fail a lender’s DTI policy, or the reverse. Both tests matter, and they answer different questions.
The APRA limit on high-DTI lending
APRA has long identified lending at six times income or more as a risk concentration worth watching. Since 1 February 2026 it has gone further: authorised deposit-taking institutions may direct no more than 20 per cent of their new owner-occupier lending, and no more than 20 per cent of new investment lending, to borrowers at a DTI of six or above. The measure is checked quarterly, applies to new loans only and excludes bridging finance plus construction lending.
The limit is a portfolio guardrail rather than a ban. Banks keep discretion to write creditworthy high-DTI loans within their quota, but some lenders have tightened their own internal caps below the regulator’s threshold, particularly for investors. A client who clears serviceability comfortably can still be declined because the lender has run out of quarterly headroom.
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How lenders weigh a high-DTI application
A DTI at or above six invites extra scrutiny but does not end the conversation. Lenders look at the whole file: a strong credit history, genuine savings, stable employment and lower-than-assessed living expenses all support an exception request. Where the ratio is inflated by short-term debts, paying down a personal loan or card limits before application can pull the figure back under six without touching the property plan.
Working the file when the ratio is high
As a mortgage broker, you have three practical levers. Restructure the debt so expensive short-term liabilities are cleared before the application is assessed. Match the client to a lender whose policy tolerates their ratio, which means knowing current internal caps rather than assuming the regulator’s threshold applies everywhere. And where an investor is blocked by an ADI’s quota, remember that APRA’s limit does not bind non-bank lenders, which keeps options open for well-serviced borrowers who fail only on concentration grounds.
One mistake to avoid is shopping a marginal application around blindly. Each decline adds enquiry noise to the file, and some lenders ask whether the application has been submitted elsewhere. Diagnose why the DTI is high, fix what can be fixed, then target lenders with documented headroom rather than hoping a broad search finds an exception.
Lender differences and what to monitor
Beyond the regulatory cap, each lender sets its own lending criteria for high-DTI files, and those settings move with market conditions and quarterly reporting results. Watch how your panel lenders treat investors near the threshold, because that segment carries the least headroom under the new limits. Aggregator policy updates and lender newsletters are usually the first place these changes appear.
Helping clients improve their position
Clients who understand their own numbers make better borrowing decisions. Walking them through budgeting, debt reduction and realistic income planning does more for a future approval than any single product feature, and it positions you as the adviser they return to before their next purchase.
Digital tools now let clients track debts and income in real time, and connecting your CRM to those feeds makes the loan application process faster because figures arrive verified instead of estimated. Before you lodge the next file with total debt above five times income, calculate the exact DTI yourself and check your target lender’s current high-DTI policy in writing; if the number sits at six or above, have a fallback lender already identified.
