If the rules are changed, new guidance is expected in the second half of 2026.
Last year, the Financial Policy Committee (FPC) recommended easing the 15% flow limit to allow lenders to increase their share of lending at high LTIs. It said that while individual lenders could exceed the 15% threshold, the aggregate flow of new lending across the sector should remain within the limit.
The FCA and PRA allowed lenders to apply to breach the limit on an interim basis, resulting in industry-wide mortgage policy changes.
The regulators said that to allow for a permanent change, the PRA would publish the aggregate high-LTI flow each quarter on its website from the date the rules come into force, measuring high-LTI flow using fixed quarters, rather than a four-quarter rolling average.
The aggregate limit will work to “guard against the build-up of excessive levels of household indebtedness”, the regulators said.
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The PRA said this approach would preserve lenders’ resilience, as it would require them to prudently manage their high-LTI lending and maintain management standards.
The FCA said the proposals were “compatible” with its aim to ensure the markets function well.
The regulators both expect this to result in “increased lending, providing greater access to otherwise creditworthy households to borrow at higher LTIs”, and encourage a broader range of business models, which could “improve the quality and variety of products on offer” and promote competition.
The change could also enable lending to more borrowers, improve homeownership rates, encourage more housebuilding and make the UK housing and mortgage markets more attractive for investors.
The proposals come as the FCA is working on its Mortgage Rule Review, which will first focus on first-time buyers and under-served borrowers.
Working in a prudent manner
The PRA has said that lenders exceeding the 15% LTI limit should be acting prudently and have measures in place to manage lending with no “significant changes to business practices”.
Lenders will be expected to determine their own risk appetites, while the FCA requires firms to consider the associated risks.
Firms that lend above 15% should have “effective board oversight” to reduce the flow back towards 15% if requested by regulators, and be able to evidence this.
This would include monitoring the current and expected future flow, high-risk segments, and the performance of these mortgages.
For lenders within a group lending at above the ‘de minimis’ threshold, the flow will be measured at group level, applying to firms issuing up to £150m in lending each year or fewer than 300 regulated mortgages over two consecutive rolling periods of four quarters.
Where gradual adjustments are required of firms lending above 15%, firms would be expected to reduce this fractionally toward 15% and based on a fixed quarter to avoid over-correction.
The regulator will not prescribe what fraction would be used for adjustments in advance, so avoid excessive changes that disrupt the market.
Market-wide expectations will be published by regulators if lenders are required to reduce their lending limits to be within the 15% aggregate flow.
Lenders will not be expected to withdraw existing mortgage offers in these circumstances.
The regulators have proposed to exclude further advances and retirement interest-only (RIO) mortgages from the LTI flow limit, as these have not been included when measuring the flow of high-LTI mortgages.
A first-time buyer boost
The proposals should benefit both borrowers and lenders, and the PRA has anticipated a rise in homeownership rates, as first-time buyers account for a rising share of high-LTI lending.
In Q2 2025, they accounted for 54% of all high-LTI lending.
The PRA said the changes will “reinforce financial inclusion” by giving people access to financial services, enabling them to get onto the housing ladder and supporting first-time buyers struggling to save a large deposit.
The regulator considered that an increase in high-LTI mortgages could “meet previously unmet demand from creditworthy individuals, including first-time buyers and borrowers who lack financial support or are on average to lower incomes”.
This should also help building societies in particular, as they tend to be constrained by the types of lending they can provide, the PRA added.
