What is a Good DTI Ratio in Australia?
Last updated: 6 May 2025
The debt-to-income (DTI) ratio is one of the most important — and least understood — metrics in Australian mortgage lending. As of 2024, APRA guidance means that loans with a DTI above 6× receive significantly closer scrutiny, and many lenders will decline outright above this threshold.
What is the DTI ratio?
Your DTI ratio is calculated as:
Total debt includes the proposed new mortgage plus all existing debt balances (car loans, personal loans, credit card limits, HECS/HELP). Gross annual income is your pre-tax income from all sources.
Example: $720,000 mortgage + $20,000 car loan on $120,000 income = DTI of 6.17× — above the APRA threshold.
What DTI do Australian lenders consider acceptable?
| DTI ratio | Lender response |
|---|---|
| Under 4× | Strong application — most lenders comfortable |
| 4× – 5× | Good — standard approval pathway |
| 5× – 6× | Elevated — some lenders apply closer scrutiny |
| 6× – 7× | High — most lenders flag, many decline |
| Above 7× | Very high — specialist lenders only, at much higher rates |
Why 6× became the key threshold
APRA introduced DTI monitoring guidance in 2021 as a macroprudential tool to address rising household debt levels. While not a hard regulatory cap, APRA requires lenders to report the proportion of new lending above 6× DTI and maintain policies to limit concentration in this segment. This has effectively created a de facto ceiling at 6× for mainstream lenders.
How to calculate your DTI
Use this formula:
- Add up all proposed and existing debt balances (not monthly payments): mortgage + car loan + personal loan + (credit card limit × 3.8)
- Note your gross annual income (all sources, before tax)
- Divide total debt by annual income
Note: credit card limits are typically included at their full limit, not the balance — and some lenders annualise the minimum monthly payment rather than using the limit. Check with your specific lender.
How to improve your DTI before applying
- Pay down existing debts: Reducing a car loan balance of $20,000 reduces DTI by 0.17× on a $120,000 income
- Cancel unused credit cards: Closing a $15,000 credit card improves DTI by 0.125× immediately
- Reduce the loan amount: A larger deposit directly reduces DTI. Each additional $50,000 in deposit reduces DTI by 0.42× on a $120,000 income
- Increase income: A pay rise, secondary income, or co-borrower with income improves DTI proportionally
- Choose a different lender: Some lenders have higher DTI tolerance, particularly for high-income borrowers or certain property types
DTI vs serviceability — what's the difference?
DTI is a balance-based ratio (debt vs income). Serviceability is a cashflow-based test (can you meet monthly repayments at the assessment rate after expenses?). Both matter. A borrower can pass serviceability but fail DTI, or vice versa. Both need to be satisfied for most lenders.
Sources: APRA Information Paper — Residential Mortgage Lending (2021), APRA Annual Report. General information only — not financial advice.