Individual caps are gone. A shared market-wide limit takes their place - with teeth
UK lenders just got more room to move on loan-to-income ratios - and the shift could open doors for first-time buyers.
The Bank of England's Prudential Regulation Authority and the Financial Conduct Authority finalized new rules on October 14, scrapping the firm-level cap that has limited each individual lender's high loan-to-income lending to 15% of new residential mortgages since 2014. That cap is gone. In its place: a market-wide aggregate limit of 15%, with individual lenders free to exceed it as long as the industry total stays within bounds.
The new framework takes effect October 28, 2026.
High LTI lending, under this policy, means any mortgage where the loan is at or above 4.5 times the borrower's income. Under the old rules, no single lender could write more than 15% of its new mortgages at that level. Under the new rules, a lender with the appetite, controls, and governance to go higher can do so - provided the aggregate across all lenders remains consistent with the Financial Policy Committee's 15% ceiling.
The practical effect? More competition at the high end of the income multiple, and more flexibility for lenders to shape their business models around borrowers who need to stretch.
Who gets through the door
First-time buyers could be among the biggest beneficiaries. The policy statement notes that since the original framework launched in 2014, first-time buyers have made up an average of 44% of mortgage volume. But by the second quarter of 2025, they accounted for 54% of all high-LTI lending. The regulators say the change could increase homeownership rates by broadening the range of lender business models in the market.
The catch is the enforcement mechanism. If the market-wide aggregate creeps above 15%, the regulators will step in. Lenders whose own high-LTI share sits above 15% would be expected to scale back - not overnight, but in what the policy statement calls a "smooth and predictable" manner.
The four-quarter fight
That mechanism was the most debated part of the consultation. The PRA and FCA received 15 responses to CP6/26, and the majority pushed back on the original proposal to measure each lender's compliance on a single-calendar-quarter basis. Respondents argued that mortgage completions are volatile quarter to quarter - seasonal swings, the unpredictable gap between approval and completion, and the knock-on effects of other policy changes make it impractical to manage high-LTI flow precisely within a 90-day window.
The regulators listened. The final policy adopts a rolling four-quarter measure for calculating each lender's individual high-LTI share and for setting adjustment expectations. The single-quarter measure is retained only for monitoring the aggregate - giving the PRA and FCA an early-warning signal without forcing lenders into sudden lending-criteria shifts that could leave borrowers stranded mid-application.
Seven respondents argued the adjustment mechanism should differentiate between lenders by size, business model, or risk profile. Three said the uniform approach would hit smaller lenders harder - they contribute less to the aggregate but find it tougher to calibrate their lending mix precisely. The regulators rejected that argument. The smallest operators already get a carve-out: lenders writing fewer than 300 mortgages or less than £150 million in mortgage credit over two consecutive four-quarter periods are exempt from the limit altogether. Beyond that threshold, the adjustment rate applies proportionally to how far each lender has stretched past 15%, so the actual reduction scales with the degree of exceedance.
What the regulator wants to see
On governance, the final policy introduces a new PRA supervisory statement - SS 2/26 - and new FCA general guidance, replacing guidance that dates back to October 2014. Lenders planning to push above 15% must notify their regulator. But the regulators are deliberately not prescribing a one-size-fits-all compliance model. Board oversight, risk appetite frameworks, internal monitoring - the expectation is that lenders already writing high-LTI mortgages have these controls in place, and those planning to increase should assess whether their existing frameworks are fit for the job.
The PRA will publish the aggregate high-LTI flow on its website each quarter, starting with Q3 2026 data published in Q4 2026. In a concession to industry feedback, the publication will include the total volume of completed mortgages in scope and how that compares to all completed mortgages in the quarter - giving lenders a clearer read on where the market sits relative to the trigger point.
Scope and what comes next
Further advances and retirement interest-only mortgage contracts are explicitly excluded from the LTI flow limit, a clarification several respondents welcomed.
Several respondents also pushed back on the 4.5 times income threshold itself, arguing it no longer reflects current market conditions and should be raised to 5 times. Others called for the small-lender exemption threshold to be lifted to as high as £1 billion. The regulators considered those points outside the scope of this consultation and passed the feedback to the FPC for its next review of housing policy tools.
For UK mortgage lenders, the operational takeaway is clear: the ceiling on how much high-LTI business you can write is now set by your own risk appetite, not the regulator's formula. But the market-wide aggregate is the new boundary everyone shares, and managing around it will take better data, faster feedback loops, and governance that can prove it works when the regulator comes asking.
