UK FCA and UK PRA published a consultation on proposed amendments to the PRA's Rulebook and FCA's guidance on loan to income (LTI) ratios in mortgage lending.
Background
LTI flow limit ensures mortgage lenders limit number of new residential mortgage loans made with LTI ratio at, or greater than, 4.5 to no more than 15% of their total number of new mortgage loans per annum, UK FPC in Nov. 2024 recommended changes.
Sought increase of de minimis threshold above which LTI flow limit is applied.
Current de minimis threshold exempts from the LTI flow limit lenders that extend residential mortgages of less than £100 million in value per four rolling quarters.
Proposal
Raise LTI flow limit de minimus threshold from £100 million to £150 million per annum.
Change would address inadvertent regulatory tightening by increasing the value of residential mortgage lending that small lenders can extend before becoming subject to LTI flow limit, contributing to regulators' secondary objectives on competition, growth.
PRA proposes to implement change by amending Housing Part of the PRA Rulebook.
FCA by amending FG14/8Guidance on the FPC's recommendation on loan to income ratios in mortgage lending, first issued Oct. 2014, revised as FG17/2 in Feb. 2017.
Effectiveness
Consultation closes May 8, 2025, all responses on proposals should be sent to the FCA.
Consultation period is short due to the narrow scope of the proposal, in order to allow regulators to implement the change more swiftly, bringing benefits to firms sooner.
Following this, FCA will issue revised final guidance and PRA will publish a policy statement so that the respective guidance and final rules can be in place by H2 2025.
Regulators
UK FCA
Entity Types
Bank; BS; MG Orig
Reference
UK PRA CP6/25, UK FCA CP25/6, 4/3/2025; FG14/8; FG17/2
