APRA Chair John Lonsdale emphasized the proactive approach, aiming to reduce high-risk lending before it poses systemic threats. The banking sector’s exposure to residential mortgages makes it particularly vulnerable to housing shocks. This is APRA’s first loan regulation change since 2017 and aligns with similar actions in New Zealand and Canada.

The move follows recent interest rate cuts and government stimulus for first-home buyers, which have spurred record property prices and an 18% surge in investor loans last quarter. Market expectations now lean toward a potential rate hike by the Reserve Bank of Australia, currently holding at 3.6%. The Australian Banking Association supports the policy, praising the exemption that supports housing supply.

For borrowers, this means that securing a high DTI loan may become more challenging. Prospective homebuyers should assess their financial positions and consider strategies to improve their DTI ratios, such as increasing income or reducing existing debts. Consulting with financial advisors or mortgage brokers can provide personalized guidance tailored to individual circumstances.