APRA Changes Intended to Ease Competition for First Home Buyers, but Will They?

If you’ve noticed a sudden rise in the competition to secure a residential property in December, 2025, then it’s because the banking regulator, the Australian Prudential Regulation Authority (APRA), announced it will impose new debt-to-income limits on banks after February 1, 2026.

APRA has defined a high debt-to-income loan (HDTIL) as one where the total amount borrowed is more than six times the borrower’s annual household income. So, after this date banks must cap the number of high-risk loans (those over the six-times income value) at 20 percent of new mortgages from Feb 2026. This move is expected to impact high-borrowing first-home buyers (FHB) who will be owner-occupiers, particularly those dreaming of getting a loan to meet (sometimes) unrealistic property dreams.

But for once, FHBs could have an edge over investors, who, as a demographic, have a track record of borrowing high amounts relative to their income stream. 

APRA indicated the 20 percent cap will apply separately to investor and owner-occupier loans, to avoid the risk of investors pushing aside those wanting to purchase a home rather than an income stream.

So, what does this mean for you?

Well, banks look at your income and debt levels to determine the amount of your loan. For example, if you are part of a household with an annual combined income of $150,000, then a loan which had your total debt at $900,000 would be included in that limit. If you earn what the ATO reports as the average national taxable income of $75,000, this equation will allow you to borrow up to $450,000, or if your combined income was $100,000, then the debt limit would be $600,000.

Which means for many FHB or those on a limited income, your choice of location could potentially be more limited than it was a few months ago. This also means lenders, large and small, will become more selective and competitive – and the big banks may also reach their HDTIL limits faster than smaller lenders.

The good news is that many FHB and owner-occupiers borrow below a 6 x DTI and will not be impacted. However, for those investors who feel that they could be impacted, there will likely be a scurry now to purchase an investment property prior to the new ruling by APRA being implemented.

And in more good news, there are three categories of loans not included: construction of new dwellings, purchase of newly-built dwellings, and bridging finance for owner-occupiers.

So, where to from here?

We advise – as always – to have your ducks in a row and get your finances sorted as quickly as possible, so if a property comes on to the market which meets your needs and wants, you can move as quickly as possible.

Remember, you can contact us for advice on reputable mortgage brokers who can help you navigate these new lending rules, while we help you find your new home.

Start your #GoldCoast property search early. Let’s discuss how we can turn your dream of owning a home into a reality.

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