Australia’s new mortgage caps unlikely to hit bank credit growth

The new limit may mitigate risks of significant increases in household debt.

New residential mortgage caps by Australia are unlikely to affect banks’ credit growth immediately, according to Fitch Ratings, although it is expected to contain expansion in riskier lending.

On 26 November 2025, the Australian Prudential Regulation Authority (APRA) announced that authorised deposit-taking institutions will be required to limit new residential mortgage lending with debt-to-income (DTI) ratio of six times or greater to 20% of total new lending.

This means that Australian authorities are limiting lending for residential property-purposes to individuals with high debt compared to their incomes.

“We do not expect an immediate impact on credit growth, as the DTI rules are being implemented pre-emptively, unlike previous macroprudential limits on interest-only and investor lending, which were imposed only after financial stability risks had emerged,” Fitch Ratings said in a commentary on 27 November 2025.

The new DTI limit is expected to mitigate risks of further significant increases in Australian household debt, which reached 182% of disposable income as of end-June 2025.

Fitch said that the new DTI limits are not a reflection of weakening underwriting standards within the system. “Existing APRA guidelines and macroprudential tools have already reduced mortgage portfolio risk over the last decade,” Fitch wrote.

Prospective first-time homeowners in Australia increasingly need to take on more debt to participate in home ownership, according to an earlier report by S&P Global Ratings. 

Housing affordability has become an issue in Australia that even the largest banks have taken note of the issue. For example, National Australia Bank (NAB), one of the biggest banks in Australia and in the Asia Pacific based on asset-size, pledged about $39.3b to address the housing crisis.