Unlocking the Reserve Bank’s Proposed Debt to Income Restrictions – What Home Buyers and Property Investors Need to Know

By Max Shin

The Reserve Bank has recently announced its proposal to introduce the debt to income (DTI) restrictions on residential mortgage lending. But what exactly does this mean, and how might it affect those looking to step into the property market?

What is the DTI proposal?

The purposes of the policy are to bring stability in the residential property sector and to reduce the households’ default on their mortgage. The DTI ratio is a tool that measures the amount of debt a person has compared to their income. It's a way for banks and lenders to assess how much debt someone can handle based on their earnings. The Reserve Bank is considering implementing a maximum DTI ratio, meaning that lenders wouldn't be able to provide mortgages to individuals whose debt exceeds a certain multiple of their income. 

What this means is that:

  • Owner-occupier can borrow 6 times of income; and
  • Property investors can borrow 7 times of income.

So, if your income is $100,000, you can borrow up to $600,000 to buy a home to live in and $700,000 to buy a residential investment property.

Implications for First Home Buyers

For first home buyers, the DTI ratio could make it more difficult to secure a mortgage, especially if you have significant existing debt or relatively low incomes. Banks (and lenders) may be more cautious about lending to first home buyers who have high DTI ratios, which could force some potential buyers to delay your home purchasing plans.

Implications for Residential Property Investors

Residential property investors may also feel the impact of the DTI policy. Investors who rely heavily on debt to finance your property purchases may find it harder to expand your portfolios, particularly if you already have high levels of debt relative to your income. Some commentators anticipate that the policy could lead to a cooling of the property market.


The Reserve Bank’s proposed DTI policy introduces a new element to the New Zealand housing market. While aimed at promoting financial stability, it presents challenges and opportunities for home buyers (including first home buyers) and property investors. It is anticipated that the policy may be implemented in the middle of the year. If you are looking to buy a house whether owner-occupied or investment, it is important to understand the implications of the DTI proposal and to adapt your strategies accordingly. We will come back with a further update once the Reserve Bank finalises the proposal.

We have taken care to ensure that the information given is accurate, however it is intended for general guidance only and it should not be relied upon in individual cases. Professional advice should always be sought before any decision or action is taken.