PRA seeks greater flexibility as high loan-to-income lending expands
The Prudential Regulation Authority (PRA) has opened a consultation on changes to the UK’s approach to high loan-to-income (LTI) mortgage lending.
The development follows a recommendation by the Financial Policy Committee to adjust how the LTI “flow limit” is applied. Under the existing framework, individual lenders are constrained by a 15% cap on the share of new residential mortgages advanced at high LTIs.
In July 2025, the FPC indicated that lenders could increase high LTI activity without breaching the overall 15% limit for the market, even if some firms individually exceeded 15%. The PRA’s consultation reflects that direction.
Under the proposals, the current firm-level 15% flow limit would be removed. Instead, the regulators would monitor aggregate high LTI lending across the market and, if needed, introduce gradual adjustments to keep overall activity within the limit. The PRA said the intention was to provide lenders with more discretion to set high LTI volumes in line with their risk appetite, while maintaining oversight to protect financial stability.
The consultation includes draft amendments to the PRA Rulebook, a proposed PRA supervisory statement, and updated Financial Conduct Authority guidance. The measures are expected to apply to PRA-authorised firms, including banks and building societies, as well as FCA-authorised lenders that are not covered by PRA rules.
“This consultation makes it clear that lenders will need strong governance, monitoring and board oversight where high loan-to-income lending forms a significant part of their mortgage strategy,” said Damien Burke, head of regulatory practice at banking & credit advisory consultancy Broadstone.
“Firms will need to carefully manage lending pipelines and risk appetite, particularly if the overall market approaches regulatory limits and individual lenders are required to slow high loan-to-income lending.
“Individual and ongoing affordability assessments will remain central, so this is less about encouraging riskier lending and more about ensuring firms have the controls, oversight and processes in place to manage higher LTI lending responsibly.”
Bank of England data published in December showed a marked increase in high loan-to-income borrowing. The share of advances to borrowers with high LTI ratios rose by 3.3 percentage points over the quarter to 44.7%, the steepest quarterly increase since the third quarter of 2020.
The consultation closes on 1 July 2026. The PRA expects any changes to take effect in the second half of 2026.
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