What has changed
Mortgage lenders in the UK will no longer face an individual 15 per cent ceiling on the share of new home loans that can be issued at high loan-to-income multiples. The Prudential Regulation Authority and Financial Conduct Authority have finalised a change that gives lenders more room to set their own approach, while retaining an overall limit intended to keep high-multiple lending across the market consistent with a 15 per cent threshold.
A high loan-to-income mortgage is one where the loan is at least 4.5 times the borrower’s gross income, or the combined gross income of joint borrowers. The change is in the way the limit is applied, not in the definition of a high-multiple loan. It removes the firm-specific cap; it does not abolish the market-wide safeguard.
The new rules and guidance are due to commence on 28 October. The PRA’s rules apply to PRA-authorised mortgage lenders and relevant subsidiaries. FCA guidance covers FCA-authorised mortgage lenders that are not within the PRA rules’ scope. The policy followed a joint consultation and takes account of responses from lenders and other organisations.
Market-wide monitoring remains
The regulators will continue to assess the aggregate flow of high-multiple mortgages against the Financial Policy Committee’s 15 per cent recommendation. If the overall flow is considered inconsistent with that level, firms may be expected to reduce their share gradually towards 15 per cent. The policy therefore allows a lender’s own share to exceed 15 per cent when market conditions permit, rather than guaranteeing that any particular lender can do so indefinitely.
There are two measurement periods. Regulators will monitor the market-wide aggregate using a single calendar quarter. Individual lenders’ flows, and any expectations that they adjust lending, will be assessed on a rolling four-quarter basis. This change from the consultation proposal is intended to make adjustments more manageable and reduce the risk of abrupt shifts in lending. The regulators say adjustments should be smooth and predictable rather than sudden.
The PRA plans to publish the aggregate quarterly measure alongside the total volume of completed mortgages covered by the policy and the share they represent of all completed mortgages. The FCA will also monitor aggregate and firm-level flows and use them in supervisory engagement. These measures provide lenders with information about market conditions; they do not amount to an allocation of lending capacity to individual applicants.
More discretion, with controls
Lenders have more discretion to set high-multiple lending strategies according to their business models and risk appetite. That flexibility is accompanied by governance and risk-management expectations. The PRA’s supervisory statement and FCA guidance sit alongside existing requirements for firms’ controls and senior management responsibilities.
The regulators have said the change could support greater competition and a wider range of lending models. They also anticipate that it may increase home ownership, noting the growing share of high-multiple lending accounted for by first-time buyers. These are expected effects, not guaranteed outcomes. The policy does not require lenders to offer more high-multiple mortgages, and each lender remains responsible for prudent underwriting and its own risk controls.
Removing the regulatory flow cap does not remove affordability checks or oblige a lender to approve an application. A borrower’s income multiple is only one part of a mortgage decision. Lenders still make individual decisions under their wider lending criteria, and the policy does not promise cheaper borrowing, access to a particular mortgage product or a higher amount for any household.
What borrowers should understand
Lenders may have greater scope to decide how much of their new lending falls at or above the 4.5-times-income threshold, provided the market-wide position remains consistent with the overall limit and firms manage the risks. If aggregate lending moves beyond the level regulators consider consistent with the recommendation, firms may face expectations to scale back gradually.
For people looking to buy in London and elsewhere, the announcement is a change to regulatory policy, not to individual eligibility. It does not establish that lenders will expand high-multiple lending in every part of the country, nor does it predict house prices or mortgage rates. Any effect will depend on lender choices, market-wide monitoring and borrowers’ circumstances.
