RBA Report Shows New High-DTI Lending Well Below APRA Limits

The Reserve Bank of Australia's (RBA) October 2026 Financial Stability Review revealed that new lending at high debt-to-income (DTI) ratios remains comfortably below the 20% limit set by the Australian Prudential Regulation Authority (APRA). This finding indicates that the proportion of new home loans with high DTI ratios is well within the regulatory ceiling, suggesting that lending standards have not slipped.

A debt-to-income ratio compares a borrower's debt with their income. Higher ratios mean larger debt relative to income, increasing the impact of interest rate hikes or income drops on repayments. The RBA's report emphasized that most Australian households with mortgages are well-positioned to handle tougher conditions, reinforcing the lack of concern over lending standards.

The review also noted that housing credit growth has eased, particularly for investors. While the share of interest-only lending has increased, the RBA does not view this as a immediate concern. Credit conditions are influenced by monetary policy, with the RBA raising the cash rate target to 4.60% on 29 September, marking its fourth increase this year.

The quality of new lending is crucial for future financial resilience. Borrowers with moderate DTI ratios generally have more flexibility to absorb rate increases or income shocks. The RBA's severe stress scenario, which includes higher unemployment and inflation, suggests that only around 5% of mortgagors would be at higher risk of default, slightly above the 2023 peak.