The Bank of England is examining whether to raise its high loan-to-income mortgage threshold to five times household income from 4.5 times, as policymakers face pressure to improve access to home ownership while the UK housing market loses momentum, the Financial Times reported on Saturday.
The Bottom Line
- Regulators recently removed individual 15% lending caps for lenders on October 28 while retaining aggregate market-wide limits, setting the stage for broader lending flexibility.
- High loan-to-income lending reached 14.1% in the current quarter, with the four-quarter rolling average sitting at 12%, according to Financial Policy Committee records.
- UK Finance estimates that raising the threshold to five times income could free up additional lending capacity equivalent to 7% of annual new residential mortgage lending.
Regulatory Framework Shifts and Market-Wide Limits
The Financial Policy Committee is reviewing the mortgage restrictions to give lenders more scope for larger loans. Under the current framework, lenders keep high loan-to-income mortgages below 15% of total new residential mortgages across the market.
On October 28, the Bank of England’s Prudential Regulation Authority and the Financial Conduct Authority implemented changes that removed the individual 15% cap for lenders. As detailed in the official policy statement from the Bank of England, firms now have greater flexibility to determine their individual high loan-to-income lending strategies based on their specific risk appetite.
While individual caps are gone, the aggregate market-wide limit remains active. If total lending becomes inconsistent with the Financial Policy Committee’s 15% limit, regulators expect firms to gradually reduce their share in a smooth and predictable way.
Slowing Momentum in the UK Housing Market
The timing of the policy review coincides with a cooling property market across the United Kingdom. Nationwide data published on Friday showed that annual house price growth slowed to 0.5% in October, dropping from 0.8% in September.
Month-on-month prices remained unchanged as rising mortgage costs and expectations of higher interest rates weighed heavily on buyer demand. High loan-to-income mortgages taken out by first-time buyers rose 66% in 2025, according to the Financial Times.
| Metric | Current Level | Previous / Proposed Framework |
|---|---|---|
| Current Quarter High-LTI Lending | 14.1% | Below the 15% aggregate limit |
| Four-Quarter Rolling Average | 12.0% | Monitored for market consistency |
| First-Time Buyer High-LTI Growth | 66% increase (2025) | N/A |
Additional Lending Capacity and Future Oversight
Freeing up additional lending capacity remains the central objective of the proposed threshold adjustment. According to UK Finance estimates cited by the Financial Times, moving the cap to five times income could release lending capacity equal to 7% of annual new residential mortgage volume.
To monitor stability, the Prudential Regulation Authority will publish aggregate single-quarter high loan-to-income flow measures on its website each quarter. Meanwhile, the Financial Conduct Authority will publish information when downward adjustments are expected from lenders.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
