The Prudential Regulation Authority (PRA) is reviewing its loan-to-income (LTI) ratio requirements for residential mortgage lending and is offering firms a modification by consent that disapplies the relevant PRA Rulebook provision while the review is ongoing. For lenders that take up the modification, the 15% flow limit on high LTI lending is disapplied with immediate effect. Under the current rule, mortgage lenders must limit new residential mortgage loans with an LTI ratio at, or greater than, 4.5 to no more than 15% of their total number of new mortgage loans per annum. The Financial Policy Committee (FPC) recommended that implementation be amended to allow individual lenders to increase their share of lending at high LTIs, while aiming to keep aggregate high LTI flows consistent with the 15% limit. Firms consenting to the modification must, within one month, provide details of material changes to their business plan (including expected high LTI shares over the next four quarters), risk appetite, and risk management framework (including high LTI risk limits), and must report monthly on the volume and share of high LTI mortgage approvals and completions, with the first submission covering the preceding three months. Once applied for, the modification ceases at the end of 30 June 2026 or earlier if the original rule is modified or ceases to apply following the PRA’s review. The PRA will consult in due course on changes to the LTI flow limit requirement, and it may revoke or revise the modification, including if aggregate high LTI lending exceeds 15%; approved directions will be published for each firm on the Financial Services Register.

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