Introducing NEW Debt-to-income (DTI) restrictions residential lending

Debt-to-income (DTI) restrictions and loosening loan to value ratios (LVR) for residential lending

The Reserve bank has now confirmed from the 1st July 2024 they are activating new Debt-to-income (DTI) restrictions and loosening loan to value ratios (LVR) for residential lending. Learn more here.

DTIs and LVRs might sound like a jargony jumble of letters, but they’re actually an important tool the Reserve Bank can use to protect homeowners, and banks. The team at the Reserve Bank have been warning for a while now that a combination of higher interest rates, a cost-of-living crisis and falling house prices could lead to an increasing number of people coming under intense mortgage stress. This has given them the drive to make this decision.

So, what does this mean if you’re planning on buying your first home?

Essentially, the lower your DTI, the more likely you’ll be able to access a home loan.

The Reserve Bank’s proposal restricts the banks to only be able to hand out 20% of their mortgages to owner occupiers with a DTI greater than six, for investor lending the DTI limit 7 for 20% of their application. The banks have made a huge number of changes in the past few years with rising interest rates and anticipating the reserve bank would make this change. So for many entering the market you may see little to no impact by these changes.

The new restrictions effectively means most owner-occupiers with an income of $100,000 would be able to borrow $600,000, and investors $700,000.

To calculate your DTI ratio, work out your total debt (including outstanding credit card loans, car loans, student loans, and other debt obligations) and your gross income (your total income before taxes and deductions). Your DTI ratio = total debt + desired mortgage / gross income, so if you earn $80,000 before tax, you would like to borrow $360,000 and you have a total of debt of $120,000 your DTI ratio calculation would look like this:

$120,000 + goal mortgage of $360,000 = $480,000 / $80,000 = DTI ratio of 6.0

First home buyers with a DTI of 6 or more may find it harder to secure a mortgage, there is however exempt products available on the market at the same time there are several ways you can work towards improving your DTI ratio in the months leading up to purchasing your first home, including:


Kāinga Ora First Home Loans and Newly Built Homes are exempt from this calculation, you would still need to demonstrate proven affordability however.  This way if your DTI is over 6 your lending would not be impacted by these restrictions.

There could be a temporary option to consider a non-bank provider for a short period of time in order to take your step onto the property ladder.

The Mortgage Girls can talk you through the options here, and discuss whether any of the above may suit you. Simply call us today on 0800 864 864


Paying off high-interest credit card debt, considering refinancing onto lower interest rates to help you pay off sooner.

It might be worth looking at your repayments to see if there is wiggle room in your budget to get these repaid sooner in order to be able to exclude them from your DTI ratio.

Having less outgoings will also be helpful when it comes to adding your mortgage, rates and insurance payments into your budget. The Mortgage Girls has a suite of calculators on our website that help with comparing your rent vs home loan budget, check them out!


Increasing your income can lower your DTI ratio. This income increase may involve negotiating a pay rise, finding a higher-paying job, or starting a side hustle to generate additional income.


Reducing your monthly expenses can free up more income to pay off debt. This spending reduction may involve cutting back on unnecessary expenses, saving money on bills and groceries, or finding cheaper housing or transportation options.

Have more questions? We’re your team!

We can help you with the following New Zealand wide!

Savings Planning for a First Home Deposits
Home Lending for First Home Buyers
Home Lending for existing Home Buyers
Rental Property Investment Lending
% Fixed Rate Reviews
Home Loan Top Ups / Refinancing
Business / Commercial Lending *
Debt Consolidation
Health / Life / Income Protection Insurance’s

To find out more give The Mortgage Girls a non-obligation free call on 0800 864 864 today or visit our website.

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