On 3 April 2025, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) launched a consultation, FCA CP25/6 and PRA CP6/25, on proposed amendments to the PRA Rulebook and FCA Guidance concerning the de minimis threshold for the loan to income (LTI) flow limit in mortgage lending.
Background
The LTI flow limit ensures that mortgage lenders limit the number of new residential mortgage loans made with an LTI ratio of 4.5 or above, to no more than 15% of their total number of new mortgage loans per annum. Under the current de minimis threshold, lenders that extend residential mortgages of less than £100m in value or fewer than 300 in number per annum are exempt from the LTI flow limit.
The Financial Policy Committee (FPC) has recommended that the LTI flow limit should only apply to lenders that extend residential mortgages above £150m per year, rather than the £100m threshold (which was set in 2014).
FCA and PRA proposals
CP25/6 sets out the PRA’s and FCA’s proposals to implement the FPC’s recommendation by amending their existing rules and general guidance (respectively). In particular:
- The PRA proposes to make amendments to the Housing Part of the PRA Rulebook.
- The FCA proposes to amend the general guidance it initially issued in October 2014 (in FG14/8) and revised in February 2017 (in FG17/2).
Next steps
As the proposals are narrow in scope and will result in fewer firms having to comply with the LTI limit, the consultation is open for 5 weeks, closing on 8 May 2025.
The FCA is accepting responses on behalf of itself and the PRA, and both regulators will then consider the responses received and seek to resolve any issues raised. They aim to issue their finalised respective guidance and final rules so that they can be in place by H2 2025.