The Bank of England’s Financial Policy Committee (FPC) has recommended an amendment to the loan to income (LTI) flow limit that will give lenders more flexibility to grant mortgages to buyers who can demonstrate affordability.
The FPC recommends that the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) amend implementation of the LTI flow limit to allow individual lenders to increase their share of lending at high LTIs.
Currently, around 10% of new mortgages are more than 4.5 times the borrower’s total household income. Under the new recommendations, individual lenders will be able to issue more than 15% of mortgages at over 4.5 times the borrower’s income.
The FPC outlined the rationale for the recommendations in its July Financial Stability Report, pointing out that the lack of a sufficient deposit remains the biggest barrier to home-ownership. The average house price in England and Wales increased from 3.5 to 6.5 times the average salary between 1997 and 2007, and remains around this level.
As a result, prospective first-time buyers need both a large deposit and a large loan in relation to their income in order to access a mortgage, the FPC said.
“For many prospective FTBs, these high deposit requirements are a barrier to purchasing a home. Just under 80% of that group do not have sufficient savings to cover a 5% deposit on a median-priced property typically purchased by an FTB in their area, based on the latest available survey evidence.
“Staff analysis suggests a further 6% of prospective FTBs would be able to raise a deposit but would not be able to meet either affordability tests that would apply under the FCA’s current Mortgage Conduct of Business (MCOB) framework (assuming a stress rate of 7%), or would be above lenders’ own loan to income (LTI) ratio caps (assumed to be set at around 5.5).
“A further 1% would not meet other requirements lenders set to manage their high-LTI lending (eg around minimum salary). The remaining 15% would not be constrained by any of these factors.”
Paul Broadhead, head of mortgages and housing at the Building Societies Association, welcomed the recommendations. He commented:
“This is a step in the right direction, and will enable more first-time buyers that can demonstrate affordability to access home ownership. Individual firms, including building societies will have immediate flexibility to lend to more borrowers without increasing the overall risks in the financial system.
“We have been calling for an uplift in the FPC LTI flow limits for some time and it is likely that today’s announcement will deliver meaningful benefits to aspiring homeowners and in turn, help stimulate economic growth.
“We look forward to continuing to work with regulators and government to review mortgage regulation to ensure that we have a market that is innovative, fit for the future and maintains consumer protection at its heart.”
Read the report in full: Financial Stability Report – July 2025
