The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have announced the permanent removal of the high loan-to-income (LTI) mortgage cap, a significant shift in the UK mortgage market. This change allows lenders to offer more high-LTI mortgages, potentially making homeownership more accessible for borrowers.
What is the High-LTI Mortgage Cap?
The high LTI mortgage cap previously restricted lenders from issuing more than 15% of their mortgage book in high LTI loans, defined as mortgages exceeding 4.5 times a borrower’s income. This cap was designed to mitigate risks in the housing market by preventing excessive borrowing. With the removal of this cap, lenders can now offer higher LTI mortgages without the previous limitations.
Why Was the Cap Removed?
The FCA and PRA conducted consultations with various stakeholders, including lenders and industry associations, to assess the effectiveness of the cap. Feedback from 15 firms indicated a consensus for reform, with many arguing that the existing 4.5 times income limit was outdated. As a result, the regulators decided to remove the firm-level cap while maintaining an overall aggregate limit of 15% on high LTI lending across the market.
What This Means for Borrowers
For borrowers, the removal of the high LTI mortgage cap means greater access to higher borrowing limits. This change is particularly beneficial for first-time buyers and those with high earning potential who may have struggled to secure mortgages under the previous restrictions. Lenders that have already applied to exceed the 15% limit will not need to take additional action as the new regulations take effect on 28 October 2026.
How Will Lenders Respond?
Lenders are expected to adapt their lending strategies in light of this change. The PRA will publish the first aggregate flow of high LTI mortgages in Q4 2026, covering the third quarter. This data will provide insights into how lenders are adjusting their portfolios in response to the lifted cap. Some industry players have suggested that the income multiple limit could be increased to five times, which the FCA will consider during its upcoming Mortgage Rule Review.
Frequently asked questions
What is the impact of removing the high LTI mortgage cap?
The removal of the high LTI mortgage cap allows lenders to offer more high LTI mortgages, potentially increasing access to homeownership for creditworthy borrowers.
Will lenders need to change their existing high LTI mortgage applications?
No, lenders that have already applied to exceed the 15% lending limit will not need to take further action as the new regulations will take effect on 28 October 2026.
