Debt-to-income restrictions: what the bank limits cover
The Reserve Bank limits banks' high-DTI lending, using total debt and gross income, with different thresholds for owner-occupiers and investors.
On this page
- Effective from
- 1 July 2024
- Owner-occupier high-DTI
- Ratio greater than 6
- Investor high-DTI
- Ratio greater than 7
- High-DTI allowance
- 20% of each lending category
- Income basis
- Annual gross income before tax
A limit on bank lending
From 1 July 2024, the DTI rules allow banks to make up to 20% of owner-occupier lending to borrowers with a ratio greater than 6, and up to 20% of investor lending to borrowers with a ratio greater than 7. These speed limits apply to new residential lending in New Zealand by banks, rather than non-bank providers. They allow some lending above the thresholds and do not guarantee approval below them. Reserve Bank, DTI restrictions (opens in a new tab).
Debt includes more than the proposed mortgage
The ratio compares total debt, including the proposed borrowing, with annual gross income before tax. The Reserve Bank's examples include existing mortgages, student loans and car loans. Credit cards are counted using their limits rather than their outstanding balances; its top-up example also includes an overdraft limit. A low current card balance therefore does not mean the credit facility is absent from the DTI assessment. Reserve Bank, DTI restrictions (opens in a new tab).
Income is assessed by the bank
The Reserve Bank's examples combine borrowers' before-tax salaries. Its investment-property example also includes gross rental income and a self-employed borrower's income assessed by the bank using historical earnings. An entered income total is not evidence that a lender will accept every component or assess it at the same amount. Reserve Bank, DTI restrictions (opens in a new tab).
Exempt lending and separate affordability checks
The Reserve Bank lists exemptions including Kāinga Ora loans, qualifying refinancing without increased borrowing, qualifying loan portability, bridging finance, property remediation and qualifying construction or newly built home purchases. Banks also apply other lending rules and their own affordability assessments. The headroom calculator applies the published threshold to entered totals; it does not assess exemptions, verify income or debt, run a servicing test, or allocate a bank's high-DTI allowance. Reserve Bank, DTI restrictions (opens in a new tab).
An exemption has its own conditions
The construction exemption described by the Reserve Bank covers constructing a new home or buying a newly built home from its developer within the stated completion window. Its extension example explains that extending an existing house is different. Refinancing and moving a loan between properties also have conditions about whether borrowing increases. A general description of the project is therefore insufficient to establish exempt status. Reserve Bank, DTI restrictions (opens in a new tab).