FCA and PRA confirm final rules for removal of high-LTI mortgage cap

The FCA and PRA have introduced their final policy to remove the high loan-to-income flow limit for UK mortgage lenders.

Under the new rules, first announced in July last year, lenders can increase their share of lending at high LTIs, above the previous 15% cap.

Following a consultation, from 28th October, high LTI lending by individual lenders can exceed 15% of their total number of new residential mortgages, provided that the total level of high LTI lending across the entire market remains broadly unchanged.

If the aggregate becomes inconsistent with the 15% limit, the regulators may expect firms to gradually reduce their share of high LTI lending back towards 15%.

The regulators have amended the final policy so that a firm’s high LTI flow, and expectations for any adjustment in lenders’ high LTI flows, are measured on a rolling four-quarter basis. However, they will use a single-calendar-quarter measure to monitor the aggregate high LTI flow.

In their final policy statement, the FCA and PRA say they anticipate that the proposals will lead to increased competition and "may increase homeownership rates, as first-time buyers have accounted for an increasing share of high LTI lending".