Limits on high loan-to-income (LTI) mortgage lending could be relaxed under new plans proposed by the FCA and PRA.
Currently lenders that want more than 15% of their residential mortgage book to exceed an LTI of 4.5x must apply to the regulator first.
This has been the case since July 2025, when the Financial Policy Committee (FPC) told the PRA and FCA that the previous limit of no more than 15% high-LTI lending per firm could be relaxed so long as the overall market does not exceed 15%.
The proposed changes would scrap the need for individual lenders to apply for permission to go above 15%. Lenders would instead be trusted to go over the 15% limit, so long as they do it responsibly.
The overall marketwide flow limit of no more than 15% high-LTI lending would still apply after the mooted changes, laid out in a joint consultation paper with the FCA and PRA today.
The consultation paper said: “The regulators propose to remove the current 15% LTI flow limit from the PRA Rulebook and FCA guidance, as relevant to individual lenders, following the FPC’s recommendation.”
If the overall level of high-LTI lending in the market goes above 15%, this flexibility would be reduced, the regulators said.
The paper added: “The regulators propose that when the aggregate flow is below 15%, lenders should have increased flexibility compared to the current policy to determine their own high LTI lending strategies, provided these are based on a robust risk-based approach with appropriate internal governance and controls.”
Individual lenders that go above the 15% high-LTI limit would be expected to have plans to reduce this back down to 15% if asked by the regulators.
The regulators would monitor the flow rate on a quarterly basis rather than the current four-quarter rolling average under the suggested changes.
The changes would also exclude further advances and retirement interest-only mortgage contracts from the LTI flow limit.
An FCA spokesperson said the current LTI flow limit “plays an important role in protecting borrowers and financial stability, while still allowing creditworthy households to access home ownership”.
The spokesperson added: “Reviewing how the LTI framework operates will help ensure our guidance is clear, proportionate and fit for today’s market. Feedback from this consultation will help shape our mortgage requirements and improve outcomes for homeowners.”
Damien Burke, head of regulatory practice at banking and credit advisory consultancy Broadstone, said: “This consultation makes it clear that lenders will need strong governance, monitoring and board oversight where high LTI lending forms a significant part of their mortgage strategy.
“Firms will need to carefully manage lending pipelines and risk appetite, particularly if the overall market approaches regulatory limits and individual lenders are required to slow high LTI lending.
“Individual and ongoing affordability assessments will remain central, so this is less about encouraging riskier lending and more about ensuring firms have the controls, oversight and processes in place to manage higher LTI lending responsibly.”
