The new debt-to-income (DTI) ratio limit introduced by the Australian Prudential Regulation Authority (APRA) will have "likely small" macro impact with being slightly dovish for the cash rate, said Bank of America in a Friday report.

The bank said that APRA's DTI limit should impact investors more than owner-occupiers, allowing more scope for first-time buyers and owner-occupiers to drive housing activity, rather than investors who invest in multiple properties.

The bank believes that housing market momentum is building in Australia, as house prices are expected to increase by 10% in 2026, driven by interest rate cuts and government policy that boost housing demand, while supply remains somewhat constrained.

The bank expects housing credit growth of 7% through 2026 as investor lending remains strong while owner-occupier rises of 6%, around its historical average pace.

APRA has flagged that investor lending limits could come next if signs emerge of a material build-up in vulnerabilities driven by strong investor growth. While the bank expects investor credit growth to remain solid, it views lending limits as unlikely because DTI limits will be in place to prevent vulnerabilities from building.

BofA added that it believes loan-to-value ratio limits are likely off the table because government policies are in place to support first home buyers, and a noted benefit of DTI limits was that first home buyers likely won't be affected.