In recent months, Australia's property market has experienced a surge in investor activity, with investors accounting for two in every five new home loans in the third quarter of 2025. This uptick has contributed to rising property prices and heightened concerns about the sustainability of current lending practices.

APRA's decision to implement the DTI cap is a response to these developments, aiming to ensure that lending standards remain robust and that borrowers are not overextending themselves financially. By capping the proportion of high DTI loans, APRA seeks to promote responsible lending and protect the broader financial system from potential shocks.

For borrowers, this change means that obtaining a mortgage with a high DTI ratio may become more challenging. Lenders will need to assess applications more stringently, considering the borrower's income relative to the loan amount. Prospective homebuyers should be prepared to demonstrate strong financial health and may need to adjust their borrowing expectations accordingly.

In summary, APRA's introduction of a 20% cap on high DTI home loans is a strategic move to mitigate risks associated with the current property market dynamics. Both lenders and borrowers must adapt to these new regulations to ensure a stable and sustainable housing market in Australia.