Limits on high loan to income value (LTI) mortgage loans could be relaxed under new plans proposed by the FCA and PRA.
Currently, lenders who want more than 15% of their residential mortgage portfolio to exceed an LTI of 4.5x must first apply to the regulator.
This has been the case since July 2025when the Financial Policy Committee (FPC) told the PRA and FCA that the previous limit of no more than 15% high LTI loans per company could be relaxed, as long as the overall market does not exceed 15%.
The proposed changes would remove the need for individual lenders to request permission to go above 15%. Instead, lenders could be trusted to exceed the 15% limit, as long as they do so responsibly.
The general market-wide flow limit of no more than 15% high LTI loans would still apply following the proposed changes, as set out today in a joint consultation paper with the FCA and the PRA.
The consultation document 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 recommendation.”
If the total level of high LTI loans in the market rises above 15%, this flexibility would decrease, regulators said.
The article added: “The regulators propose that where the aggregate flow is less than 15%, lenders should have greater flexibility compared to current policies 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 are expected to have plans to reduce this to 15% if regulators request it.
Regulators would monitor flow rates on a quarterly basis instead of the current four-quarter moving average under the proposed changes.
The changes would also exclude further advances and 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: “By assessing how the LTI framework works, we can ensure that our guidance is clear, proportionate and appropriate for the current market. Feedback from this consultation will help shape our mortgage requirements and improve outcomes for homeowners.”
Damien Burke, head of the regulatory practice at banking and credit consultancy Broadstone, said: “This consultation makes clear that lenders need strong governance, oversight and board oversight when high LTI lending is a key part of their mortgage strategy.
“Companies will need to carefully manage lending pipelines and risk appetite, especially as 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 it is less about encouraging riskier lending and more about ensuring firms have the controls, oversight and processes in place to handle higher LTI lending responsibly.”