The FCA has published Guidance Consultation 14/4: Guidance on the Financial Policy Committee’s (FPC) recommendation on loan to income (LTI) ratios in mortgage lending (GC14/4).
Within the FPC’s recommendation, the PRA and FCA have been requested to ensure that mortgage lenders limit the proportion of mortgages at LTI multiples of 4.5 and above to no more than 15% of their new mortgages. It applies to all lenders that extend residential mortgage lending in excess of £100 million per year and the FPC has requested that it be implemented as soon as possible.
In GC14/4, the FCA sets out how it will:
- expect firms to act in the light of the FPC’s recommendation;
- determine which firms should apply the LTI limit when the guidance comes into effect;
- determine which firms should apply the LTI limit on an on-going basis; and
- monitor if a firm’s mortgage lending is consistent with its expectations on the LTI limit and what supervisory action may be taken.