The PRA has published Policy Statement 11/16: Amendments to the PRA’s rules on loan to income ratios in mortgage lending (PS11/16). In this Policy Statement the PRA sets out final rules intended to keep second and subsequent charge mortgage contracts excluded from the loan to income (LTI) flow limit, following the implementation of the Mortgage Credit Directive (MCD).
From 21 March 2016 second and subsequent charge mortgage contracts will fall under the definition of a regulated mortgage contract. This change is part of the UK’s implementation of the Mortgage Credit Directive. The PRA’s rules place a loan to income flow limit on regulated mortgage contracts. The implementation of the MCD means that the LTI flow limit would automatically apply to second and subsequent charge mortgage contracts, which are currently exempted from the LTI flow limit.
The PRA proposes to amend its rules in order to maintain its current policy of excluding such second and subsequent charge mortgage contracts from the LTI limit, with the intention to consult subsequently on including these loans in the LTI flow limit when loan level data becomes available in the course of 2017.
View PRA policy statement and final rules amending rules on LTI ratios in mortgage lending, 24 March 2016