The regulators' policy removes the firm-specific 15% cap on high loan-to-income (LTI) lending, according to the Bank of England. The policy takes effect on 28 October.
The policy gives lenders greater flexibility to determine their individual high LTI lending strategies, in line with their risk appetite and business models, the regulators said. Lenders can lend above 15% while the aggregate high LTI flow is within a level consistent with the FPC's recommended 15% limit.
If the aggregate becomes inconsistent with the FPC's limit, the regulators may expect firms to reduce their share of high LTI lending gradually back towards 15%, in a smooth and predictable way. The regulators said they have not set any current expectations on firms to reduce their high LTI flow.
After consultation, the regulators amended the final policy so that a firm's high LTI flow, and expectations for any adjustment, are measured on a rolling four-quarter basis. They anticipate that the proposals will lead to greater usage of the aggregate limit and increased competition.
The Prudential Regulation Authority (PRA) policy applies to all PRA-authorised mortgage lenders and any subsidiary of a PRA-authorised firm that is a mortgage lender. From 14 October 2026, the PRA is publishing the aggregate high LTI flow figure, which is the share of new regulated mortgage contracts at LTIs at or greater than 4.5 times income.
Sources: bankofengland.co.uk, bankofengland.co.uk