Debt-to-income (DTI) Rules Explained: What They Mean for NZ Borrowers in 2026

They don’t replace a bank’s normal affordability checks, and they’re not designed to “set house prices.” They are a financial stability tool that limits how much high-DTI lending banks can do, particularly during booms.

If you’re buying your first home, moving, investing, or just trying to understand why your borrowing capacity feels capped even with a decent deposit, DTIs are one of the key reasons.

What is a DTI, in plain English?

A DTI is your total debt compared to your annual gross (before tax) income.

The basic idea

• Higher DTI = more debt relative to income

• That typically means higher risk if interest rates rise, income falls, or expenses increase

The Reserve Bank’s DTI explainer frames “high DTI” as borrowing above a threshold (more on that below).

What counts as “debt”?

Banks look at more than just your mortgage. The RBNZ’s worked examples note that banks can consider things like:

• Existing loans (car loans, student loans)

• Credit card limits (often the limit, not the balance)

This is why trimming consumer debt can improve borrowing capacity faster than most people expect.

What are the DTI rules in New Zealand?

DTI restrictions came into effect on 1 July 2024 and apply to new residential mortgage lending by banks, for both owner-occupiers and investors.

The thresholds and “speed limits”

The rules allow banks to lend up to:

• 20% of owner-occupier lending to borrowers with a DTI ratio greater than 6

• 20% of investor lending to borrowers with a DTI ratio greater than 7

These caps are called speed limits. They mean banks can still do some higher-DTI lending, but only up to a limited share of their new lending.

Important: DTI is not the only test

Even if your DTI is below the threshold, banks still apply their own affordability assessments. The RBNZ explicitly notes that banks will carry out their own checks and other lending rules will influence the final amount they will lend.

If you want a clear overview of how that serviceability assessment works in practice, see our guide:
https://www.newzealandmortgages.co.nz/blog/how-banks-assess-mortgage-serviceability-in-new-zealand

Are there situations where DTI rules don’t apply?

Yes. The RBNZ lists several exclusions where the DTI rules don’t apply, including:

• Kāinga Ora loans, including First Home Loans

• Refinancing where the new loan value doesn’t exceed the original loan value

• Portability (moving a loan from one property to another) provided the total loan doesn’t increase

• Bridging finance

• Property remediation (e.g., fixing a leaky home)

• Construction loans and some newly built home purchases (within 6 months of completion)

Two practical takeaways from this:

• Refixing and refinancing aren’t automatically “blocked” by DTIs (depending on whether debt increases).

• New builds and construction have special treatment, which can be helpful, but lender policy still matters.

What DTI rules mean for different borrowers

First-home buyers

DTI tends to hit first-home buyers when:

• Income hasn’t caught up to house prices (especially in higher-priced regions)

• There’s consumer debt sitting in the background (car loans, credit cards)

What to focus on:

• Reduce non-mortgage debt where possible

• Keep credit limits sensible

• Build a clean, well-documented application so the bank’s serviceability view is as strong as possible

Useful internal guides:

• First-home buyer guide: https://www.newzealandmortgages.co.nz/blog/first-home-buyers-guide-how-to-get-a-mortgage-in-new-zealand

• Mortgage approval checklist: https://www.newzealandmortgages.co.nz/blog/the-smart-buyer-s-guide-to-getting-mortgage-approval-in-new-zealand-(2025-edition)

• Using guarantors/family equity: https://www.newzealandmortgages.co.nz/blog/how-to-use-a-guarantor-or-family-equity-to-get-a-home-loan

Home movers and upgraders

If you’re upsizing, DTIs can become relevant quickly because you often:

• Carry a larger debt balance relative to income (even if you have equity)

• Need bridging finance or temporary overlap of commitments

The good news is DTI rules exclude bridging finance in the RBNZ framework, and portability can be excluded if total debt doesn’t increase. But each bank still decides how to structure and approve the full package.

What to focus on:

• Map your likely end-state debt (post-sale) rather than just the “in-between” period

• Start early so you can structure the lending cleanly

Investors

Investors have a higher DTI threshold (7 rather than 6), but that doesn’t mean “easy approvals.” Investors are often assessed on:

• Total portfolio leverage

• Cash buffers and vacancy risk

• Serviceability assumptions

What to focus on:

• Portfolio planning: where does total debt sit relative to total income?

• Clean cashflow presentation (especially if self-employed or multiple income sources)

Useful internal link:

• Interest deductibility overview: https://www.newzealandmortgages.co.nz/blog/interest-deductibility-tax-impact-for-nz-investment-property-(post-reforms)

How to think about DTI if you’re close to the limit

DTI isn’t a hard stop, but it changes the playing field

Because the high-DTI share is capped, borrowers above the threshold can still be approved, but:

• The bank may be more selective

• Timing and lender choice can matter more

• Stronger overall profiles (income stability, expenses, equity, buffers) tend to win the scarce “above-threshold” slots

The levers you can actually pull

If your borrowing is pushing above the threshold, your practical options usually fall into a few buckets:

• Reduce the debt required (bigger deposit, smaller purchase, restructure)

• Reduce other debt (consumer lending, credit card limits)

• Improve income position (where genuine and documentable)

• Consider whether an exempt category applies (e.g., certain refinance scenarios, Kāinga Ora, construction/new build)

Don’t confuse DTI with affordability

It’s possible to be:

• Under the DTI threshold but still fail serviceability (cashflow too tight), or

• Over the DTI threshold but still affordable (strong income and buffers)

That’s why it helps to run both the “policy lens” and the “budget lens.”

If you want a practical affordability sense-check check out our calculator:
https://www.newzealandmortgages.co.nz/calculators/mortgage-seviceability-calculator

Our Final Word

The key points to remember

• DTIs compare your total debt to your gross income and limit how much high-DTI lending banks can do.

• The current settings allow banks to lend up to 20% above DTI > 6 (owner-occupiers) and 20% above DTI > 7 (investors).

• DTI rules sit alongside normal bank serviceability and expense checks.

• There are important exemptions (including Kāinga Ora loans, some refinancing, bridging finance, and certain construction/new build situations).

• If you’re near the threshold, reducing consumer debt and structuring the loan well can make a meaningful difference.

Talk to an adviser

DTIs can be frustrating because they’re not always visible until you hit the edge of them. If you’d like help sense-checking your borrowing capacity or structuring a deal, our advisers can:

• Work through your DTI position alongside bank serviceability

• Help reduce “hidden debt” issues (credit limits, consumer lending) that quietly reduce capacity

• Structure lending for movers, investors, and complex scenarios (including exemptions where relevant)

• Compare lender policy differences and negotiate where it makes sense

Get in touch and we’ll walk you through your options in plain English.