Regulators plan to further relax high LTI lending limits

The PRA and FCA have launched a new consultation on high loan-to-income (LTI) mortgage lending.

The regulators propose to remove the current 15% LTI flow limit, following the FPC’s recommendation in July 2025.

The latest proposals build on the FPC's initial recommendation, which required lenders to apply to the regulator for permission to disapply the 15% limit.

Instead, lenders will 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".
 
The removal of the LTI flow limit would allow individual lenders to increase their share of lending at high LTIs, while aiming to ensure the aggregate flow remained consistent with the limit of 15%. 

The changes also exclude further advances and retirement interest-only mortgage contracts from the LTI flow limit.

To ensure that the aggregate flow remains consistent with the 15% limit, there may be instances where the regulators expect firms to gradually reduce their high LTI flow towards 15%. To enable firms to plan for such adjustments, the PRA would publish the aggregate high LTI flow on its website each quarter from the date the new PRA rules come into force. 

The regulators consider the proposals could lead to increased lending, providing greater access to otherwise creditworthy households to borrow at higher LTIs.

Damien Burke, head of regulatory practice at Broadstone, commented: “This consultation makes it clear that lenders will need strong governance, monitoring and board oversight where high loan-to-income 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 loan-to-income 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.”

Paul Broadhead, head of mortgage and housing policy at the Building Societies Association (BSA), said: “The Building Societies Association welcomes today’s consultation from the PRA and FCA on the future regime for LTI flow limits. The regulators’ direction of travel proposes removing the individual restrictions on lenders and using the cap at a market level, as originally intended.

“This ongoing flexibility means building societies and other lenders can continue to support more borrowers who can demonstrate that they can afford a mortgage, while maintaining the overall resilience of the financial system.

“The temporary changes, which were introduced in July last year alongside the Financial Policy Committee’s review of the thresholds at which these limits apply, have enabled building societies to review their mortgage offerings and support more than 1,000 additional first-time buyers a month into homeownership.

“This is a three-month consultation, so we will work through the detail with members and respond in due course.”