The PRA has published Consultation Paper 44/16: Amendments to the PRA’s rules on loan to income (LTI) ratios in mortgage lending (CP44/16).
In CP44/16 the PRA notes that the implementation of the LTI flow limit has not raised significant operational challenges for firms but that the fixed quarterly nature of the LTI flow limit could make it harder for some firms to manage their business pipeline. In light of this the PRA is proposing to change the current fixed quarterly flow limit to a four quarter rolling limit. The PRA also sets out additional clarification on the scope of the LTI flow limit regarding interest roll-up bridging loans and mortgages ‘ported’ to another property where there is no increase in the principal outstanding.
The FCA has published Guidance Consultation 16/8: Amendments to Guidance on loan to income ratios in mortgage lending (GC16/8). In GC16/8 the FCA proposes to amend Finalised Guidance 14/8: Guidance on the Financial Policy Committee’s recommendation on loan to income ratios in mortgage lending by moving to a four quarter rolling limit. The FCA also sets out worked examples comparing the current approach (quarterly limit) with the new proposal (four quarter rolling limit). The FCA also sets out additional clarification on:
- the scope of the LTI flow limit regarding second charge mortgages;
- interest roll-up bridging loans; and
- mortgages ported to another property where there is no increase in the principal outstanding.
The closing date for responses to both consultations is 10 January 2017.