If it feels like inflation has been hanging around longer than that mate who “just needed the couch for a few nights,” you’re not imagining it. Australia’s cost of living itch is still very much here – annoying enough to notice constantly, not dramatic enough to cause panic, but absolutely impossible to ignore.
Despite all the rate hikes and warnings, inflation just won’t budge. Every time we think it might settle down, another bump pops up in groceries, fuel, insurance or rent. It’s basically the financial equivalent of a mozzie that keeps coming back, no matter how many times you swat at it.
For borrowers, this stubborn inflation is especially frustrating. It means interest rates stay higher for longer, lenders stay cautious, and any hope of a decent rate cut feels like it keeps getting shoved further into the distance. It’s like waiting for a sale that not only never arrives, but keeps getting more expensive.
There’s no sugar coating it, the current reality is that rates may in fact nudge up again before they go down.
In this week’s newsletter, we look at a surge in high risk lending and what is being done to bring it under control.
What’s a “high-risk loan”?
In this context, a high-risk loan is simply a home loan where you borrow more than six times your annual income. That kind of heavy borrowing, especially when paired with high property prices, is considered risky.
What’s changing?
The banking regulator Australian Prudential Regulation Authority (APRA) has decided that, starting February 2026, banks can no longer write more than 20% of their new home loans as “high-risk” (i.e. debt-to-income above 6×). This cap applies separately to owner-occupiers and investors.
Why do it?
Australia’s housing market has been boiling hot for years — prices soaring, credit booming, and many households borrowing heavily. With investor loans surging (up 18% in the September quarter alone), regulators are worried the system is becoming over-leveraged, which could leave both borrowers and lenders vulnerable if things go sour.
While APRA says this move is about financial stability, not cooling prices or solving affordability, it aims to curb the most extreme borrowing before it becomes a systemic problem.
What it means for buyers and investors
- If you’re a regular buyer, it probably won’t change much — most home loans recently are already well under the 6× income threshold. In fact, only about 4% of owner-occupied loans currently exceed that limit.
- If you’re an investor or looking to borrow big (relative to your income), the cap might make it harder to grab a high-geared loan after February, or force you to put more equity into the deal rather than relying on borrowing.
Bottom line
Think of this as a safety throttle, not a market brake. It won’t bring house prices down or magically make homes more affordable. Instead, it’s meant to protect both banks and borrowers by limiting the riskiest types of home loans before they become a bigger problem.
Variable
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.
1 Year Fixed
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.
