High-LTI mortgage cap to end for lenders, but market-wide limit stays

What happened

High-LTI mortgage cap changes will remove the individual lender limit from 28 October 2026, according to policy proposals published by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA). Mortgage Solutions reported the announcement on 14 October. The regulators will keep the 15% restriction across the market rather than require every lender to stay within it individually.

Loan-to-income, or LTI, compares the size of a mortgage with a borrower’s annual income. The framework uses a threshold of 4.5 times income to identify high-LTI lending. This is different from loan-to-value, which compares the mortgage with the property’s value and therefore reflects the size of the buyer’s deposit.

The existing firm-level restriction limits the share of lending an individual lender can make at high income multiples. Under the new approach, lenders will have more room to decide how this lending fits their business, the regulators said. That flexibility does not remove the overall safeguard or make higher-multiple mortgages an entitlement for applicants.

Lenders that have already applied for permission to exceed the 15% limit will not need to take another step when the existing directions cease on 28 October, according to the announcement. The change concerns the regulatory treatment of lenders. It does not specify a new maximum mortgage amount that every borrower will be able to obtain.

The PRA also set out a safeguard for borrowers who already have an approved mortgage offer. If lenders are later asked to reduce high-LTI lending, the authority said they should make changes to future lending rather than withdraw existing approved offers. That instruction relates to adjustments under this framework, not a blanket guarantee against withdrawal for other reasons.

The background

The FCA and PRA received consultation responses from 15 firms and organisations, according to their account of the feedback. Participants included Nationwide, Lloyds Banking Group, the Building Societies Association and UK Finance. Some respondents did not agree to have their names published, so the announcement does not identify every organisation involved.

Six respondents supported removing the individual lender cap while retaining the 15% restriction across the market, the regulators said. Two favoured keeping a firm-level cap but increasing its threshold. Those positions reflect different approaches to the same question: how much freedom individual lenders should have while the authorities continue to control overall exposure.

The regulators rejected simply raising the individual cap as the answer. They said that approach could weaken their ability to maintain the aggregate limit and still prevent some lenders from matching lending to their business model and appetite for risk. Their chosen approach instead separates market-wide monitoring from the assessment of individual lenders.

The consultation also raised questions about using a single quarter to assess lending. Six respondents warned that seasonal changes or volatility could prompt repeated regulatory intervention, while seven said predicting lending over one quarter would be difficult. Three highlighted potential difficulties if lenders had to adjust their high-LTI lending at the same time.

Some feedback sought a review of the separate ‘de minimis’ threshold within the framework, the regulators said. They treated that issue as outside the consultation’s scope and passed it to the Financial Policy Committee for possible future consideration. The FCA said it would also consider the issue through its Mortgage Rule Review; the announcement did not settle that question.

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What people are saying

Alison Verlander, director of mortgages at UK Finance, welcomed the reforms on behalf of the banking and finance trade body. She said its members had sought changes that would allow lenders to help more creditworthy people buy homes while retaining overall safeguards. That is the industry body’s assessment of the potential benefit, rather than a forecast of additional mortgage approvals.

Verlander also backed the rolling four-quarter assessment, saying it would make higher-multiple lending easier to manage and reduce uncertainty for lenders and customers. Her comments addressed the practical difficulty of managing lending against a short reporting period. The regulators similarly said their revised approach would accommodate volatility and avoid unnecessarily large adjustments.

UK Finance wants the next review to consider moving the high-LTI threshold from 4.5 to five times an individual’s income, Verlander said. She linked that request to high housing costs facing prospective buyers in many areas. Some consultation respondents also supported a five-times threshold, but the announcement does not approve that separate change.

Seven respondents supported combining greater lending flexibility with stronger governance and controls, according to the consultation findings. The FCA and PRA said they would address those expectations through their existing, routine supervision of individual firms. Their response points to continuing oversight rather than leaving lenders to manage the new flexibility without regulatory scrutiny.

The PRA said lenders entering into high-LTI mortgage contracts should exercise prudence. It also said lenders belonging to a group should apply its expectations at group level. That means the authority’s stated approach looks beyond a single lending business where it forms part of a wider group.

What happens next

The regulators will continue to monitor aggregate high-LTI lending using a single calendar quarter, according to the announcement. They will use a rolling four-quarter measure when deciding whether adjustments are necessary. These measures serve different purposes: the quarterly data gives a more immediate view of activity, while the longer assessment informs decisions about reducing lending.

The PRA plans to publish its first aggregate lending-flow figures in the fourth quarter of 2026, covering the third quarter. The regulators said publishing market data would help lenders understand wider trends. The announcement gives a publication window of October to December, rather than a specific release date.

If intervention becomes necessary, the PRA may contact firms or groups exceeding a 15% flow on the four-quarter measure and ask them to reduce future high-LTI lending. Its example involved cutting that flow by a fifth in each successive quarter until it reached 15% or less. This was an illustration of possible action, not an announced reduction for a named lender.

The FCA and PRA also plan to clarify their guidance so lenders can better understand what the authorities expect. Alongside the published data, that guidance will support the operation of the market-wide limit. The announcement does not identify any lender that must change its lending immediately or set out new mortgage products for customers.

For buyers, the practical distinction is between a lender having greater regulatory flexibility and an applicant qualifying for a particular loan. Mortgage affordability assessments still consider income and outgoings, and lenders set their own eligibility criteria. Applicants should therefore check the amount and terms actually available to them rather than treat the removal of the firm-level cap as a borrowing promise.

Why this matters

For buyers whose borrowing needs are high relative to their income, the reforms could widen options at individual lenders, according to UK Finance. But the retained market-wide limit means this is not an unrestricted expansion of mortgage lending. Affordability checks and lender criteria still matter. Borrowers with approved offers also have a specific safeguard: the PRA says any required reduction in high-LTI activity should affect future lending rather than those existing offers.