Australia’s newly introduced mortgage lending caps are unlikely to slow banks’ credit expansion in the near term, though they are expected to curb higher-risk home loans, Fitch Ratings said.
The Australian Prudential Regulation Authority (APRA) announced on 26 November 2025 that banks must restrict new home loans with debt-to-income (DTI) ratios of six or more to no more than 20% of their total new lending. The measure aims to limit lending to borrowers whose debt levels are high relative to income.
Fitch noted that the policy is being rolled out proactively—unlike past interventions on interest-only and investor mortgages—so a direct and immediate hit to credit growth is not anticipated.
The tighter DTI rules are intended to reduce the chance of a sharp rise in household leverage, which stood at 182% of disposable income as of end-June 2025. The credit agency added that the move does not signal deteriorating underwriting practices, as regulatory guidance over the past decade has already bolstered mortgage quality.
Housing affordability pressures are mounting in Australia, with first-time buyers needing larger borrowings to enter the market. Major lenders like National Australia Bank have also recognized the challenge, committing billions of dollars—around $39.3 billion—to support housing supply initiatives.
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