Two Reserve Bank rules shape how much you can borrow. They measure different things, and whichever bites first is the one that limits you.
LVR: how much deposit you need
Loan-to-value ratio compares your loan to the property's value. A $640,000 loan on an $800,000 house is an 80% LVR — a 20% deposit. Banks may write up to 25% of their new owner-occupier lending above 80% LVR, and up to 10% of new investor lending above 70% LVR. Both limits were eased from 20% and 5% on 1 December 2025.
So lending with a smaller deposit isn't forbidden — it's rationed. That's why low-deposit approvals can be slower, more conditional and often carry a low-equity premium. New builds and Kāinga Ora First Home Loans are exempt from LVR restrictions entirely.
DTI: how much debt your income supports
Debt-to-income restrictions have applied since 1 July 2024. Owner-occupiers are generally capped at 6 times gross income, investors at 7 times, with banks able to write 20% of new lending above the threshold.
The critical detail is what counts as debt: all of it. Your mortgage, car loan, personal loans, hire purchase, your student loan balance — and your credit card limits.
Why your unused credit card limit costs you
Banks count the full limit on your credit cards, not the balance. A $10,000 limit you never touch is treated as $10,000 of debt because you could draw it tomorrow. On a 6× DTI that limit can reduce your borrowing capacity by $10,000 directly — so reducing or closing unused cards before applying is one of the few genuinely quick ways to improve your position.
Serviceability: the test that usually binds first
Separately from the regulatory caps, banks test whether you could still afford repayments if rates rose. They apply a servicing rate well above carded rates — a buffer of roughly 2 to 2.5 percentage points, which put test rates around 6.4–7.0% in mid-2026. For most borrowers, serviceability rather than the DTI cap is what actually sets the limit.
A speed limit is not a ban
This distinction matters more than almost anything else in the rules. The LVR and DTI limits constrain what a bank may write as a share of its totalnew lending — they are portfolio quotas, not eligibility tests applied to you individually. There is no rule saying you cannot borrow above the threshold. There is a rule saying only so much of the bank's book can look like that. The consequence is that low-deposit or high-DTI lending is a scarce allocation the bank hands to its strongest applications, which is why the same borrower can be declined at one bank, approved at another, and approved at the first one three months later when its quota resets.
Working out which rule is stopping you
Because the three constraints respond to different remedies, it is worth asking your lender or broker which one you actually failed. If it is LVR, only a bigger deposit or an exempt pathway helps. If it is DTI, the fix is more income or less total debt — a larger deposit does nothing, because the ratio never looks at the property. If it is serviceability, the levers are monthly cashflow: clearing a personal loan, cutting a card limit, or waiting for a pay rise to be established. Borrowers routinely spend months saving harder when their problem was a credit card limit all along.
Exemptions worth knowing
- Kāinga Ora First Home Loans are exempt from both LVR and DTI restrictions
- New builds and construction lending are exempt
- Refinancing without increasing the loan, portability, bridging and remediation are exempt