The Bank of England’s Financial Policy Committee (FPC) has proposed a revision to the loan-to-income (LTI) flow limit, aimed at giving mortgage lenders more discretion in approving loans for buyers who can prove affordability. The recommendation urges the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) to adjust the LTI flow limit implementation, allowing individual lenders to expand their portion of high-LTI lending.

At present, approximately 10% of new mortgages are issued at more than 4.5 times the borrower’s household income. With the new guidance, lenders would be permitted to issue over 15% of mortgages above this threshold. In its July Financial Stability Report, the FPC noted that a lack of sufficient deposit continues to be the biggest obstacle to home ownership. It highlighted that the average house price in England and Wales rose from 3.5 to 6.5 times the average salary between 1997 and 2007—and remains at that level today. 

“For many prospective FTBs, these high deposit requirements are a barrier to purchasing a home. Just under 80% of that group do not have sufficient savings to cover a 5% deposit on a median-priced property typically purchased by an FTB in their area, based on the latest available survey evidence.” 

“Staff analysis suggests a further 6% of prospective FTBs would be able to raise a deposit but would not be able to meet either affordability tests that would apply under the FCA’s current Mortgage Conduct of Business (MCOB) framework (assuming a stress rate of 7%), or would be above lenders’ own loan to income (LTI) ratio caps (assumed to be set at around 5.5).”

“A further 1% would not meet other requirements lenders set to manage their high-LTI lending (e.g., around minimum salary). The remaining 15% would not be constrained by any of these factors.”

Paul Broadhead, head of mortgages and housing at the Building Societies Association, expressed support for the move: “This is a step in the right direction, and will enable more first-time buyers that can demonstrate affordability to access home ownership. Individual firms, including building societies, will have immediate flexibility to lend to more borrowers without increasing the overall risks in the financial system.”

“We have been calling for an uplift in the FPC LTI flow limits for some time and it is likely that today’s announcement will deliver meaningful benefits to aspiring homeowners and in turn, help stimulate economic growth.”

“We look forward to continuing to work with regulators and government to review mortgage regulation to ensure that we have a market that is innovative, fit for the future and maintains consumer protection at its heart.”

Read the full report: Financial Stability Report – July 2025

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Source: Juliet Shaw, Today's Conveyancer