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New Primara research; APRA's new 20% cap on high debt-to-income home loans is aimed squarely at Australia's major banks. At the 2022 lending peak, major banks issued 26.8% of loans at six times income or higher, the only lenders to exceed the new threshold. Today, they still issue high-DTI loans at 6.9%, more than double any other lender type, meaning they'll hit the cap first as the market expands.
New research reveals that the Australian Prudential Regulation Authority's newly announced cap on high debt-to-income home loans has one clear target: Australia's major banks.
From February 2026, authorised institutions will be limited to issuing no more than 20% of new home loans at six times borrowers' income or higher. While major banks currently sit at 6.9%, well below the threshold, their historical dominance of high-risk lending means they'll be the primary lenders constrained as the market expands.
Major Banks Dominated High-Risk Lending at Market Peak
At the peak of lending in June 2022, major banks were the only segment to exceed the new 20% threshold, issuing a staggering 26.8% of new loans at six times income or higher, nearly double the next closest category. Credit unions reached 15.4%, other domestic banks 15.1%, mutual banks 14%, and foreign banks just 10%.
Even today, the 6.9% of high-DTI loans that major banks issue is more than double any other lender type. Mutual banks follow at 2.9%, credit unions and building societies at 2.2%, and other domestic banks at 1.7%, meaning major banks are issuing high-risk loans at more than triple the rate of smaller Australians banks.
One Target as Market Grows
The data is clear: this cap targets the major banks. They're the only lenders who've historically exceeded 20%, and they're still issuing high-DTI loans at rates far above everyone else. As the market heats up and lending grows, they'll hit the cap first while smaller lenders continue operating with plenty of room.
With about 10% of new investor loans at the major banks currently at or above six times income and investor lending driving growth, APRA is ensuring the big four can't repeat their 2022 peak.
