Financial Policy Committee considers raising the high-LTI threshold to five times income amid pressure from lenders and the government
The Bank of England is exploring one of the biggest overhauls of its mortgage rules in more than a decade, according to the Financial Times, with the central bank’s Financial Policy Committee (FPC) considering whether to raise the threshold at which a mortgage is classified as high loan-to-income (LTI) — from 4.5 times household income to five times.
The move, reported by the FT, comes under sustained pressure from lenders, industry bodies, and the government to loosen post-financial crisis restrictions that critics say have locked out first-time buyers, the self-employed, and workers on lower but stable incomes.
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Rules introduced in 2014
Since 2014, most UK lenders have been restricted from issuing more than 15% of new residential mortgages to borrowers taking on more than 4.5 times their household income. In July 2025, the Bank of England eased those rules by shifting the cap from individual lenders to an aggregate, market-wide basis — a change that produced a significant increase in higher-multiple lending.
According to Financial Conduct Authority (FCA) data cited by the Financial Times, the number of first-time mortgages with an LTI ratio of 4.5 or above reached 45,800 last year, up 66% from 2024. However, the sector is now approaching that aggregate ceiling. High-LTI mortgages rose from 11.8% of the overall market in the fourth quarter of 2025 to 14.1% in the third quarter of this year.
Industry backs the change
UK Finance, the banking lobby group, has calculated that raising the definition threshold to five times income could free up additional lending capacity equivalent to 7% of new residential mortgages — a market that totalled approximately £200 billion last year. Crucially, the group’s data indicates that mortgages issued at between 4.5 and five times income have recorded lower arrears than those below the 4.5 times threshold over the past decade.
“Raising the threshold to five-times income would unlock around half of currently constrained first-time buyer lending, widening access to home ownership without materially increasing default risk or amplifying the credit cycle,” UK Finance said.
The Building Societies Association (BSA) has also backed reform, stating in a recent submission to the Bank that such a move “would unlock what is currently heavily constrained lending capacity to first-time buyers and other underserved groups.”
Chancellor weighs in
The reform effort received direct government backing when Chancellor John Healey wrote to Bank of England Governor Andrew Bailey urging the FPC to act. In his letter, Healey called on the committee to “target improving access to home ownership without prejudicing financial stability, including considering how the LTI framework can better support this.”
The Bank of England told the Financial Times it “keeps its housing tools under regular review, having regard to the FPC’s primary and secondary objectives,” without confirming a timeline for any change.
Some lenders have urged the regulator to go further still — proposing that the 15% aggregate cap itself be raised, and that more small lenders be exempted from the rule altogether. The Bank confirmed that this feedback “has been passed on to FPC to consider as part of future reviews of its housing tools, alongside other relevant factors.”
For brokers, a shift in the income multiple threshold would meaningfully expand the pool of borrowers eligible for larger loans, particularly those working with first-time buyers in higher-cost markets who currently fall just outside conventional lending criteria.
No formal decision has been announced. But with the sector edging toward the aggregate LTI cap and political backing now firmly in place, the pressure for a significant rule change is mounting.
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