On 9 July 2025, the Prudential Regulation Authority (PRA) released a statement on its review of the loan-to-income (LTI) ratio requirements.

Following the Financial Policy Committee’s (FPC) recommendation, the PRA is reviewing the LTI ratio requirements and is offering a modification by consent to disapply the relevant Part of the PRA Rulebook while the review is ongoing.

Background

The current rule ensures that mortgage lenders limit the number of new residential mortgage loans made with an LTI ratio at, or greater than, 4.5 to no more than 15% of their total number of new mortgage loans per annum.

The FPC recommended that the PRA and the Financial Conduct Authority amend implementation of its LTI flow limit to allow individual lenders to increase their share of lending at high LTIs while aiming to ensure the aggregate flow remained consistent with the limit of 15%. The FPC recognised that, in doing so, such high LTI lending by individual lenders could exceed 15% of their total number of new residential mortgages while the aggregate flow remained consistent with the 15% limit.

The PRA is reviewing the LTI ratio requirements due to this suggestion, offering a modification by consent that will allow lenders to disapply the 15% limit with immediate effect.

Requirements for firms

Firms consenting to the modification will be required to:

  • Provide details of material changes to their business plan, risk appetite, and risk management framework in respect of any planned increase in the share of lending at high LTIs, within one month of taking up the modification.
  • Notify the PRA monthly of its volume and share of high LTI mortgage approvals and completions within the previous month. A firm’s first submission must include information on the preceding three months.

Once applied for, the modification will cease to have effect at the end of 30 June 2026 or, if earlier, the date the original rule is modified or ceases to apply.

The PRA will consult in due course on changes to the LTI flow limit requirement, and may revise or remove the modification at any time.