How will APRA’s "Quiet Cap" affect your next home loan?

The Australian Prudential Regulation Authority (APRA) has put a new rule in place for home loans. This is meant to make the financial system stronger as debt levels rise.

This change won’t stop the market right away, but it does show that the days of borrowing as much as possible are ending. Here’s what these new rules could mean for you, your investments, and your next property purchase.

On Thursday, 27 November 2025, APRA announced a limit on "High Debt-to-Income" (DTI) lending.

• The Rule: Banks now have to limit new mortgages where the borrower’s total debt is six times or more than their gross income (DTI ≥ 6).
• The Limit: Lenders can allocate only 20% of their new loans to this "high debt" group.
• The Nuance: The 20% cap is separate for owner-occupiers and investors. This stops banks from using safer owner-occupier loans to balance out riskier investor loans.
• Effective Date: 1 February 2026.

Most regular home buyers usually have a DTI of 4 or 5, so they won’t be affected. But three groups are likely to feel the impact:

• The Aggressive Investor: If you own several properties and use rental income to pay for new loans, your total debt can go above six times your income. This policy is mainly aimed at you.
• The High-Income Stretcher: High earners who want to buy in expensive suburbs (for example, taking out a $2 million loan on a $300,000 income) may face tougher checks if their bank is near its 20% limit.
• The "Rentvestor": If you rent your home but buy investment properties, your DTI can be higher because you pay both rent and full investment debt.

Important Exemption: APRA has excluded Construction Loans (for new dwellings) and Bridging Loans from this cap to ensure housing supply isn't choked off.

APRA is not making this decision without reason. They are responding to three clear warning signs from the September 2025 quarter. Here are the key numbers:

• The Investor Surge: Investor activity has jumped quickly. In the September quarter, new loans to investors went up by 18%. When investors move in fast, they often use their equity to borrow more, leading to more "highly indebted" borrowers.
• The "Creep" vs. The Limit: Right now, 5.5% of new loans have a DTI of 6 or more. For investors, the number is closer to 10%.
• • Why set the cap at 20%? APRA remembers 2021, when risky lending went over 24% of new loans during the last low-rate boom. By setting the limit at 20%, they hope to avoid reaching those risky levels again as rates drop.
• The Price/Income Disconnect: With borrowing capacity improving but property prices hitting new records (Sydney median >$1.6m), borrowers are increasingly forced to stretch to a DTI of 6x just to secure a standard family home.

In short, APRA is fixing the roof while the sun is shining, preventing today's 5.5% of risky loans from growing back into 24%.

(Sources: APRA Quarterly ADI Property Exposures, September 2025).

If you plan to buy or refinance in early 2026, here’s what you should do:

• Know Your Number: Don't just ask "How much can I borrow?" Ask "What is my DTI ratio?" If it's above 6, you are now in a "limited" bucket.
• Move Before Feb 1: If your DTI is close to 6 (around 5.8 to 6.2), getting unconditional approval before 1 February could help you avoid tougher checks.
• Shop Around: Since the 20% limit applies per bank, one lender might be "full" on high-DTI loans for the quarter, while another might have plenty of room. A broker's visibility into which banks are "open for business" will be more valuable than ever.

The Bottom Line: This is not a credit crunch, but it is a check on credit quality. Banks are still lending, but they will pay closer attention to your income-to-debt ratio.

Want to check your DTI? Try the Bheja Borrowing Power Calculator to see your position before you apply.