The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have announced plans to review the 4.5 times salary loan-to-income (LTI) cap, a move that could impact mortgage lending across the UK.
Current Mortgage Lending Limits and Proposed Changes
At present, lenders cannot allocate more than 15% of their annual mortgage lending to loans exceeding 4.5 times the borrower’s income. However, institutions lending under £100 million per year are exempt from this restriction.
Regulators are now proposing to raise this exemption to £150 million, allowing more small lenders to offer high-LTI mortgages without regulatory constraints.
According to the PRA:
“The change would address inadvertent regulatory tightening by increasing the value of residential mortgage lending that small lenders can extend before becoming subject to the LTI flow limit, thereby contributing to the regulators’ secondary objectives on competition, and therefore competitiveness and growth.”
While this adjustment may support smaller lenders, larger institutions remain bound by the same 4.5x cap, disappointing many industry leaders who have been advocating for broader reforms.
Will This Make Mortgages More Accessible?
With potential changes ahead, homebuyers—especially those with complex incomes—are left wondering whether they will soon have greater borrowing power. If larger lenders were granted more flexibility, it could increase mortgage accessibility, particularly for first-time buyers and those with higher income potential.
Industry Experts Push for Wider Reform
A range of financial institutions and industry bodies have called for a wider review of mortgage restrictions.
Last month, UK Finance proposed easing loan-to-income limits as part of a broader strategy to stimulate economic growth. Similarly, the Building Societies Association and the Intermediary Mortgage Lenders Association have argued that a higher LTI threshold would help increase lending, especially for first-time buyers.
Nationwide, one of the UK’s leading lenders, also urged the government to reconsider the 4.5x LTI limit after it was forced to restrict its Helping Hand mortgage—which previously supported a significant share of first-time buyers.
Henry Jordan, Director of Home at Nationwide, stated:
“We are at the limits of where we can take this product. We have not named a particular threshold but, if the limit was lifted to, say, 20%, we could fund another 10,000 first-time buyers over the next year.”
What Happens Next?
The regulatory consultation will remain open until 8 May, giving lenders and industry stakeholders an opportunity to weigh in on the proposed changes. However, for now, large lenders remain restricted, and homebuyers may still face borrowing caps that limit their affordability.
Navigating the Mortgage Market with MortgageTek
At MortgageTek, we specialize in finding the best mortgage solutions for professionals with complex incomes, including contractors, self-employed individuals, and high-net-worth clients. Whether regulations change or stay the same, our expert advisors can help you explore tailored mortgage options that fit your financial profile.
Contact us today to discuss your mortgage options with a specialist.