UK PRA and FCA consult on changes to loan to income flow limit rule

The UK Financial Conduct Authority (FCA) and UK Prudential Regulation Authority (PRA) has published consultation papers (CP26/12 / CP6/26), proposing changes to the loan to income (LTI) flow limit rule in mortgage lending. The regulators propose to remove the firm level 15% cap on high LTI lending (mortgages with an LTI ratio of 4.5 or above), while retaining the 15% limit in aggregate across the market, giving individual lenders greater flexibility to set their own high LTI strategies. This follows interim measures introduced in July 2025, under which PRA firms were permitted, via a modification by consent, to disapply the firm level cap, while FCA firms could seek individual guidance to lend above 15%, pending completion of the policy review.

The PRA proposes new rules in the Housing Part of the PRA Rulebook and a new supervisory statement, while the FCA will issue new general guidance replacing FG25/4. The regulators would publish quarterly data on aggregate high LTI lending and may expect firms to gradually reduce flows if the aggregate limit is exceeded; the consultation also clarifies scope, excluding further advances and retirement interest only mortgages. The deadline for responses is 1 July. Implementation is expected in the second half of this year with interim measures to remain in force up to the implementation date for the changes resulting from this consultation, with a backstop date of 31 December.

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