When you apply for a new home loan, or want to make changes to your existing loan, be aware that lenders take into account a range of factors.

Your income and deposit are big factors the lender considers, but they aren’t the only factors that can make a difference to their decision.

Lenders, both banks and non-bank lenders, have rules they have to comply with. Some rules are set by regulators such as the Reserve Bank, and some are policies set by the lenders themselves.

Rules can change over time depending on the housing market, competition between lenders and the wider economy.

Here’s what you need to know about why rules change, and what it can mean for you.

What are lending rules, anyway?

Most often, when we talk about lending rules, we are referring to the rules imposed on banks by the Reserve Bank.

These are things like the loan-to-value restrictions, or LVRs, which limit the amount of low-deposit lending that banks can offer to owner-occupiers and investors. The Reserve Bank can vary these “speed limits”, according to the activity that’s happening in the market. For example, as at October 2025, banks can lend a maximum of 5 percent of new lending to investors with a deposit or equity of less than 30 percent, and a maximum of 20 percent of new lending to owner-occupiers with deposit or equity of less than 20 percent.

The LVR rules are designed to limit the risk to the financial system that could occur if too many borrowers had large loans with small deposits. As we’ve seen in recent years, house prices can fall. LVR restrictions help limit the extent to which banks could be exposed to risk by borrowers who end up owing more than their homes are worth.

More recently, the Reserve Bank has also introduced debt-to-income ratios (DTIs). These rules limit the share of new lending that banks can provide to borrowers, whose total debt is high compared with their income.

For owner-occupiers, total debt generally shouldn’t be more than six times household income, and for investors, not more than seven times. The debt is calculated based on all the money a household owes, including student loans and other personal loans.

DTIs are intended to smooth some of the highs and lows of the house price cycle because values will not be able to get ahead of incomes in the same way that they might have done in the past.

In some cases, borrowers who don’t meet the bank rules may still be able to access lending through non-bank lenders. We can help you determine whether this could be an appropriate option for you.

Lenders also have their own internal rules, such as the test rate that they use to assess whether a borrower can afford loan repayments if interest rates were to rise.

What changes have been made?

There have been some key changes that have made a big difference to lending rules.

2013: The Reserve Bank introduced LVR restrictions to improve the stability of the financial system.

2020: The LVR rules were temporarily removed during the Covid-19 pandemic, when there were fears that the housing market could crash. They were reinstated when house prices began rising rapidly again.

2021/2022: Lenders were given more prescriptive rules for assessing affordability under the Credit Contracts and Consumer Finance Act, which made it harder for some borrowers to get lending. These have since been reviewed.

2024: Debt-to-income ratios were introduced, limiting the amount that a household could borrow in line with their income.

Why does this matter for borrowers?

Even if you’ve borrowed before, the criteria that banks are working with may have changed.

Keeping up-to-date with the rules that apply can help you to understand how a lender may assess your application.

Sometimes, the changes are more about the wider economy and the perceived risks to the financial system than any individual borrower’s situation.

As home loan experts, we can advise you on how you might be affected by current lending rules and can help you to determine which lender might be a suitable fit for you.

Ready to chat?

We can help you to work through what you need to know about your home loan application. Whether you’re applying for a loan for the first time, wanting to move to a second home or just need to make changes to your existing lending, we’re here to help. Get in touch with the expert SHARE team, and you’ll have a home loan expert on your side.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.