The Bank of England's Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have revised the rules regarding high loan-to-income (LTI) mortgages, potentially benefiting first-time buyers. Effective October 28, 2026, the previous individual cap of 15% on lenders' high LTI lending has been replaced by a market-wide limit of 15%, allowing individual lenders the flexibility to exceed this cap as long as the total across the industry remains compliant.
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Under the new policy, high LTI lending refers to mortgages where the loan amount is at or above 4.5 times the borrower's income. The earlier restriction limited lenders from providing more than 15% of new residential mortgages at this level. Now, lenders with the capacity to go higher may do so, provided that the total of all lenders adheres to the 15% ceiling set by the Financial Policy Committee.
This change is expected to increase competition in the high-end lending sector and provide greater flexibility for lenders to accommodate borrowers who require larger loans. First-time buyers, who made up an average of 44% of mortgage volume since 2014, could particularly benefit, especially as they represented 54% of high LTI lending by the second quarter of 2025.
However, if the aggregate market limit exceeds 15%, regulators will intervene, necessitating lenders whose individual share surpasses this limit to gradually reduce their lending. The enforcement mechanism will monitor high LTI shares through a rolling four-quarter measure rather than a single-quarter basis, easing seasonal volatility impacts and allowing for smoother adjustments in lending practices.
Concerns were raised during consultations about the uniform adjustment mechanism potentially disadvantaging smaller lenders. The PRA and FCA have addressed this by providing an exemption for lenders completing fewer than 300 mortgages or issuing less than £150 million in mortgage credit over two consecutive four-quarter periods.
With the new framework, lenders intending to exceed the 15% limit must inform their regulators and demonstrate they have the necessary governance structures in place to manage higher-risk lending. Starting in Q4 2026, the PRA will publish quarterly data on aggregate high LTI flows.
Certain mortgage types, including further advances and retirement interest-only contracts, are excluded from these LTI limits. Additional feedback regarding the 4.5 times income threshold and small lender exemption thresholds has been considered outside the current scope, to be reviewed in future assessments by the Financial Policy Committee.