The Australian property landscape is set to shift in February 2026, when new lending restrictions take effect that will particularly impact property investors.
The Australian Prudential Regulation Authority (APRA) has announced it will limit high debt-to-income (DTI) lending as a pre-emptive measure to prevent risky borrowing patterns from building up in the financial system. From 1 February, banks will be restricted to lending no more than 20% of their new mortgages to borrowers whose debt is six times their annual income or higher, with this limit applying separately to both owner-occupiers and investors.
APRA said the change is designed to prevent an unsustainable rise in household indebtedness, particularly if interest rates continue to ease and competition for mortgages intensifies.
Why will investors feel the effects first?
The restrictions will have the greatest impact on property investors, who typically borrow at higher debt-to-income ratios than owner-occupiers. Currently, around 10% of new investor loans exceed the threshold, the highest since 2023, according to APRA.
As borrowing becomes more constrained at the upper end of the income-to-debt spectrum, banks may prioritise lower-risk investor applicants or scrutinise income, serviceability and portfolio strength more closely.
Investors who rely on gearing strategies or who have multiple existing loans may find themselves nudged into the 20% high-DTI allocation, where competition for approval will be tighter.
For investors eyeing premium suburbs like Mosman, NSW, where median house prices rank among Australia's highest at over $5 million according to Domain, this means careful planning will be essential. A borrower looking for a $3 million loan would need to demonstrate annual income of at least $500,000 to avoid the restrictions, though banks can still lend to higher debt-to-income borrowers within the 20% cap.
The good news is that these limits aren't currently binding at an aggregate level, so most borrowers won't see immediate impacts on their access to credit. According to APRA, only a small number of banks are near the limit for high-DTI investor lending so far. However, this could change if investor activity accelerates through 2026.
What about owner-occupiers?
For owner-occupiers, the impact will be far more modest. Only around 4% of new owner-occupier loans currently exceed the DTI threshold, meaning most upsizers and downsizers will remain unaffected.
Importantly, the restrictions exclude bridging loans for owner-occupiers and loans for purchasing or constructing new dwellings. This exemption aims to avoid constraining housing supply while enabling smooth property transactions.
A possible boost for first home buyers?
Younger buyers looking for entry-level units in the Lower North Shore could find the new rules work in their favour.
Investors have traditionally been strong competitors in the one-bedroom and two-bedroom apartment markets. If banks pull back even slightly on higher-DTI investor lending, it could ease competitive pressure in an already contested market segment.
While price impacts are unlikely to be dramatic in tightly held suburbs like Mosman, even a small shift could improve buying conditions for first home buyers.
What does this mean for local buyers?
Overall, APRA’s move is designed to cool only the riskiest part of the lending market and not to halt demand. Investors may need to prepare for more rigorous assessments and earlier conversations with brokers or lenders, but opportunities will remain strong in blue-chip suburbs.
Have questions about your borrowing power under the new rules? Our team at R&W Mosman/Neutral Bay can help you plan your next purchase with confidence. Get in touch today.