Understanding debt-to-income ratios

The debt-to-income (DTI) ratio describes the ratio of your total debt relative to your total gross income.

What is a debt-to-income ratio?

Your DTI ratio is calculated by dividing your total debt by your total gross income.

It shows you how many more times your debt is in relation to your total gross income. For example, a DTI of five means your debt is five times your total gross income.

The Reserve Bank of New Zealand (RBNZ) is New Zealand’s central bank, and it supervises all registered banks operating in the country.

In April 2023, RBNZ introduced the DTI framework for Residential Mortgage Lending and are proposing the introduction of DTI restrictions from mid-2024. When activated, it will set limits on the amount of high DTI loans we're allowed to approve.

This, together with loan-to-value ratio (LVR) restrictions, are intended to help support financial stability by limiting higher-risk home loans, therefore reducing the likelihood of a future housing-related financial crisis

Working out your DTI ratio

Your total debt will include things such as any existing home loans, personal debts (e.g. car loans), and student loans, as well as the limits of any credit cards and overdrafts, plus any new loans being considered. Your total gross income will include your annual salary, rental income and other extra income you receive.

For example, if you have a total debt of $500,000 and your total gross income is $80,000, your DTI ratio is 6.25. This means your total debt is 6.25 times your total gross income.

Read more about the DTI restriction framework on the RBNZ website.

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