APRA's debt-to-income cap, effective February 2026, permanently restricts bank lending to borrowers with debt ratios above 6×. Non-bank lenders are exempt from this cap. Here is what that means in practice.
In February 2026, APRA's debt-to-income (DTI) cap became a permanent constraint on bank lending in Australia. The measure, which restricts authorised deposit-taking institutions from extending new loans at a DTI ratio above 6×, was introduced to limit systemic risk concentration in highly leveraged residential lending. Its effect on property investors with existing portfolios has been immediate.
How the cap works in practice
The DTI ratio is calculated as total proposed debt divided by gross annual income. For a borrower earning $200,000 per year, the maximum debt permitted under a bank's DTI cap is $1.2 million — regardless of the borrower's repayment history, property values, or rental income from the portfolio. Rental income is typically credited at 80% by banks in their serviceability calculations, which further compresses effective borrowing capacity.
For investors with two or more properties, breaching the 6× threshold is not unusual. A borrower with $1.8 million in existing debt who earns $250,000 is already at a 7.2× DTI — above the cap — before any new loan is considered. Banks are legally required to decline that borrower. Non-bank lenders are not.
Why non-bank lenders are exempt
Non-bank lenders are not authorised deposit-taking institutions and are not regulated by APRA. The DTI cap is an APRA macroprudential measure that applies only to ADIs — major banks, regional banks, credit unions, and building societies. Non-bank lenders such as those on our panel operate under Australian Credit Licences administered by ASIC, and are subject to responsible lending obligations under the National Consumer Credit Protection Act — but not to the DTI cap.
Non-bank lenders assess each application on its merits, considering income, assets, credit history, and the serviceability of the proposed repayments — without an artificial ratio ceiling.
The rate premium for this flexibility
Non-bank lenders price their products at a premium to comparable bank products, typically 50–180 basis points above the major bank standard variable rate depending on the borrower's profile, LVR, and documentation type. For a borrower who would otherwise be unable to proceed at all, the rate premium is irrelevant — the alternative is no loan. For a borrower with a strong credit profile who happens to exceed the DTI cap due to portfolio size, the premium may be a conscious and temporary trade-off.
Many borrowers refinance back to a bank lender once their DTI ratio normalises — typically following a property sale, significant income growth, or after demonstrating repayment history to a level that makes bank re-entry viable. Non-bank lending is frequently a bridge, not a permanent position.
What to consider before proceeding
- Confirm your DTI ratio is genuinely above 6× with a realistic income and debt calculation before approaching non-bank lenders.
- Understand the rate premium and its total cost over your expected loan term.
- Ask your operator which non-bank lenders offer best-execution pricing at your specific LVR and documentation type.
- Plan your refinancing pathway back to a bank lender if that is your long-term preference.
This article is published for general informational purposes. It does not constitute financial or credit advice. Eligibility for non-bank lending depends on individual circumstances. Speak with a qualified credit specialist for advice specific to your situation.
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