CP6/26 – High loan to income lending

Privacy statement

By responding to this consultation, you provide personal data to the Bank of England (the Bank, which includes the Prudential Regulation Authority (PRA)). This may include your name, contact details (including, if provided, details of the organisation you work for), and opinions or details offered in the response itself.

The response will be assessed to inform our work as a regulator and central bank, both in the public interest and in the exercise of our official authority. We may use your details to contact you to clarify any aspects of your response.

The consultation paper will explain if responses will be shared with other organisations (for example, the Financial Conduct Authority). If this is the case, the other organisation will also review the responses and may also contact you to clarify aspects of your response. We will retain all responses for the period that is relevant to supporting ongoing regulatory policy developments and reviews. However, all personal data will be redacted from the responses within five years of receipt. To find out more about how we deal with your personal data, your rights, or to get in touch please visit Privacy and the Bank of England.

Information provided in response to this consultation, including personal information, may be subject to publication or disclosure to other parties in accordance with access to information regimes including under the Freedom of Information Act 2000 or data protection legislation, or as otherwise required by law or in discharge of the Bank’s functions.

Please indicate if you regard all, or some of, the information you provide as confidential. If the Bank receives a request for disclosure of this information, we will take your indication(s) into account but cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system on emails will not, of itself, be regarded as binding on the Bank.

Responses are requested by Wednesday 1 July 2026.

Consent to publication

In the policy statement for this consultation, the PRA will publish an account, in general terms, of the representations made as part of this consultation and its response to them. In the policy statement, the PRA is also required to publish a list of respondents to its consultations, where respondents have consented to such publication.

When you respond to this consultation paper, please tell us in your response if you agree to the publication of your name, or the name of the organisation you are responding on behalf of, in the PRA’s feedback response to this consultation.

Please make it clear if you are responding as an individual or on behalf of an organisation.

Where your name comprises ‘personal data’ within the meaning of data protection law, please see the Bank’s Privacy Notice above, about how your personal data will be processed.

Please note that you do not have to give your consent to the publication of your name. If you do not give consent to your name being published in the PRA’s feedback response to this consultation, please make this clear with your response.

If you do not give consent, the PRA may still collect, record and store it in accordance with the information provided above.

You have the right to withdraw, amend or revoke your consent at any time. If you would like to do this, please contact the PRA using the contact details set out below.

Responses can be sent by email to: CP6_26@bankofengland.co.uk

Alternatively, please address any comments or enquiries to:
Macroprudential Toolkit Team, Prudential Policy
Prudential Regulation Authority
20 Moorgate
London
EC2R 6DA

1: Overview

1.1 This consultation paper (CP) sets out proposed amendments to the Prudential Regulation Authority (PRA) Rulebook and the Financial Conduct Authority’s (FCA) general guidance on the Financial Policy Committee's (FPC) recommendation to amend implementation of its loan to income (LTI) flow limit in mortgage lending.

1.2 In July 2025, the FPC recommended the PRA and FCA (collectively ‘the regulators’) amend implementation of its LTI flow limit to allow individual lenders to increase their share of lending at high LTIs, while aiming to ensure the aggregate flow remained consistent with the limit of 15%. The FPC recognised that, in doing so, such high LTI lending by individual lenders could exceed 15% of their total number of new residential mortgages while the aggregate flow remains consistent with the 15% limit. The regulators are proposing these amendments following this recommendation. The PRA proposals apply to all PRA authorised mortgage lenders and any subsidiary of a PRA-authorised firm that is a mortgage lender (hereafter for the purposes of this CP referred to collectively as ‘PRA firms’).^{footnote [1]} The FCA proposals apply to all FCA-authorised mortgage lenders that are not a subsidiary of PRA-authorised firms (hereafter referred to as ‘FCA firms’).

1.3 The proposals in this CP would result in changes to the PRA Rulebook (Appendix 2), a new PRA supervisory statement (SS) – High loan to income lending (Appendix 3), and replacement of the FCA’s general guidance, initially issued in October 2014 (FG14/8) and revised in February 2017 (FG17/2) and July 2025 (FG25/4).

1.4 The PRA has a statutory duty to consult when changing rules (Financial Services and Markets Act (FSMA) s138J). The FCA considers it appropriate in this case to consult on its implementation of the FPC’s recommendation.

1.5 The proposals include removing the current 15% high LTI flow limit for individual firms from PRA rules and FCA general guidance. The regulators propose that, while the aggregate is consistent with the FPC’s recommended 15% limit, lenders should have additional flexibility to determine their individual high LTI lending strategies, in line with their own risk appetite and business models. To ensure that the aggregate flow remains consistent with the 15% limit, as per the FPC recommendation, there may be instances where the regulators expect firms to gradually reduce their high LTI flow towards 15%. To enable firms to plan for such adjustments, the PRA would publish the aggregate high LTI flow on its website each quarter from the date the new PRA rules come into force. This webpage, and a webpage on the FCA’s website, will also include communication from the regulators on the details of any such adjustments. The regulators propose measuring high LTI flow using fixed quarters, rather than a four-quarter rolling average.

1.6 The PRA consider the proposals would preserve the resilience of firms. This is in line with the PRA’s primary objective to advance the safety and soundness of firms. PRA firms will be required to ensure their high LTI lending continues to be managed prudently, and relevant risk management standards are maintained. The aggregate high LTI flow would be kept consistent with the FPC’s 15% limit, which would continue to guard against the build-up of excessive levels of household indebtedness, which could, following a shock, result in economic instability and so in turn threaten the safety and soundness of firms and financial stability.

1.7 The FCA considers the proposals are compatible with its strategic objective to ensure that relevant markets function well. Updating its guidance advances its operational objective of enhancing market integrity. By continuing to implement the FPC’s recommendation it delivers a more sound, stable and resilient financial system. This is discussed in more detail in paragraph 4.3 below.

1.8 The regulators consider the proposals could lead to increased lending, providing greater access to otherwise creditworthy households to borrow at higher LTIs. The regulators also consider that the proposals would encourage a broader range of business models which in turn could deliver efficiency gains. These dynamics may, in turn, improve the quality and variety of products on offer, advancing the FCA’s operational objective to promote effective competition in the interest of consumers, and the PRA’s secondary objective to facilitate effective competition.

1.9 The regulators consider the proposals should advance the respective secondary competitiveness and growth objectives, by enabling more lending to borrowers which could in turn increase homeownership rates, encourage more housebuilding, and make it more attractive to invest in the UK housing and mortgage market.

1.10 The PRA has also considered how the proposal would affect its other respective secondary objectives in more detail in paragraph 2.36 below.

1.11 The PRA’s proposals are relevant to banks, building societies, friendly societies, industrial and provident societies, credit unions, PRA designated investment firms and overseas banks in relation to their UK branch activities. PRA rules also require relevant firms to apply the rules at UK subsidiary level to firms not already caught by the rules.

1.12 The FCA’s general guidance sets out its expectations of those mortgage lenders not within scope of the PRA’s rules. So, this consultation is relevant to FCA-authorised mortgage lenders that are not a subsidiary of PRA-authorised firms described in paragraph 1.11.

1.13 The PRA has not consulted the PRA Practitioner Panel and the FCA has not consulted the Statutory Panels before publishing this CP. The PRA Practitioner Panel and the FCA Statutory Panels are welcome to comment in response to this CP.

1.14 The PRA consulted the Cost Benefit Analysis (CBA) Panel in relation to the proposals in this CP. The CBA presented in Appendix 1 of this CP reflects the Panel’s feedback.

1.15 The FCA has not consulted the CBA Panel in relation to the proposals in this CP as it is not issuing guidance on rules, and so it falls outside of its requirement to do so. The FCA has included its CBA in Appendix 5 as it considered it appropriate to do so.

1.16 The analysis in this CP explains how the regulators’ proposals have had regard to the most significant matters, including an explanation of the ways in which having regard to these matters has affected the proposals.

Background

1.17 The FPC has the responsibility to identify, monitor and take action to remove or reduce systemic risks, with a view to protecting and enhancing the resilience of the UK financial system. Under its statutory powers, the FPC can make recommendations to the PRA and FCA about the exercise of their respective functions.

1.18 In June 2014, the FPC addressed a recommendation to the PRA and the FCA, asking them to ensure that mortgage lenders limit the number of new residential mortgage loans made with an LTI ratio at, or greater than, 4.5 to no more than 15% of their total number of new mortgage loans (the LTI flow limit).^{footnote [2]} The purpose of that FPC recommendation was to constrain excessive levels of household indebtedness which could, following a shock, result in economic instability and so in turn threaten the safety and soundness of firms and financial stability. The FPC noted that the original policy intent of the LTI flow limit recommendation was to ensure the flow of new residential mortgages at high LTIs did not exceed 15% of total new mortgages in aggregate.^{footnote [3]} The FPC judged that the aggregate 15% limit continued to strike the right balance between providing appropriate protection from the increased risk to economic growth of large cuts to consumption associated with an over-indebted household sector, while providing sufficient capacity for otherwise creditworthy households to borrow at higher LTIs.

1.19 In July 2025, the FPC noted it was supportive of lenders making use of their individual LTI flow limits consistent with their own risk limits and business models. In support of this, the FPC considered whether there were any impediments to using those limits for those lenders that wished to. The FPC noted that variations in risk appetite and business models might mean some lenders would not be likely to extend many mortgages at higher LTIs even as others might be constrained by regulatory limits from doing so. The FPC also noted that most lenders also left management buffers to the regulatory limit to ensure that they would not breach it. In conclusion, the FPC revoked the existing recommendation and issued a new recommendation to the PRA and FCA to amend implementation of its LTI flow limit.

1.20 Immediately following the recommendation, the PRA made available a modification by consent (MbC) for PRA firms to disapply the 15% limit and the FCA informed FCA firms they could apply for individual guidance if they wanted to lend at high LTI ratios above 15%. The regulators set out that these were interim measures while the regulators’ policy review was ongoing. In this CP, the PRA and FCA propose to implement the FPC’s recommendation by making changes to the PRA Rulebook, introducing a new PRA SS, and new FCA general guidance, as well as setting out the conditions for future relevant publications by the regulators.

Implementation

1.21 The regulators propose that the implementation date for the changes resulting from this CP will be the date the new PRA rules, SS and FCA guidance comes into force, expected to be 2026 H2. The interim measures referred to in paragraphs 2.30-2.33 will remain in force up to the implementation date for the changes resulting from this CP, with a backstop date of 31 December 2026.

Responses and next steps

1.22 This consultation closes on Wednesday 1 July 2026. The regulators invite feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP6_26@bankofengland.co.uk.

1.23 When providing your response, please tell us whether or not you consent to the PRA publishing your name, and/or the name of your organisation, as a respondent to this CP.

1.24 Please also indicate in your response if you believe any of the proposals in this consultation paper are likely to impact persons who share protected characteristics under the Equality Act 2010, and if so, please explain which groups and what the impact on such groups might be.

2: The PRA and FCA’s proposals

2.1 This chapter sets out the regulators’ proposed expectations for firms engaging in high LTI lending. The PRA aims to ensure firms’ safety and soundness, while allowing firms to take advantage of greater levels of high LTI lending consistent with their business models. The FCA aims to ensure that the integrity of the UK financial system is protected, while allowing firms to take advantage of greater levels of high LTI lending.

Risk management expectations regarding high LTI lending

General governance & risk management expectations

2.2 The regulators propose to remove the current 15% LTI flow limit from the PRA Rulebook and FCA guidance, as relevant to individual lenders, following the FPC’s recommendation.

2.3 The regulators propose that when the aggregate flow is below 15%, lenders should have increased flexibility compared to the current policy to determine their own high LTI lending strategies, provided these are based on a robust risk-based approach with appropriate internal governance and controls.

2.4 The PRA proposes new rules in the Housing Part of the PRA Rulebook (Appendix 2) and a new SS – High loan to income lending (Appendix 3). The FCA proposes replacement FCA guidance (Appendix 4).

2.5 The PRA’s proposals set out that PRA firms engaging in high LTI mortgages must do so in a prudent manner, maintaining a robust risk management framework and governance arrangements.

2.6 The PRA holds the view that firms currently extending high LTI mortgages should already have prudent measures in place to manage such lending and so these new expectations when proportionately implemented will not result in significant changes to current business practices.

2.7 The PRA expects that all firms lending high LTI mortgages should determine their own individual risk appetite limits on high LTI lending.^{footnote [4]} The proposals are in-line with the Risk Control Part of the PRA Rulebook, requiring firms to understand and monitor their risk strategy. This is to ensure that these firms continue to consider the impact of high LTI lending on their own resilience, in-line with existing risk management requirements. The PRA proposes that firms can determine if the risk management for this purpose should be at firm or group level.

2.8 The FCA expects FCA firms lending high LTI mortgages to consider the degree of risk associated with their level of high LTI lending and incorporate it into their risk management systems and controls, in a way that ensures they continue to comply with all relevant obligations, for example those set out in Senior Management Arrangements, Systems and Controls (SYSC).

Board oversight

2.9 The regulators would expect firms that choose to lend at levels above 15% to ensure they have effective board oversight that ensures the firm would be able to reduce their high LTI flow towards 15%, if expected to by the regulators. The regulators would expect to be able to ask to see evidence of this board oversight as appropriate. Firms that choose to lend at levels below 15% would not be expected to ensure there is specific oversight from the board but should be comfortable that they have an appropriate governance arrangement for their risk management framework.

2.10 The PRA proposes that effective oversight of how risks arising from this lending will be managed would include monitoring and reporting to the board against any relevant risk limits set by the firm. The PRA proposes this would include monitoring the current and expected future flow, related credit concentrations and high-risk segments,^{footnote [5]} and the performance of these mortgages.

Preparedness to adjust

2.11 The regulators would expect lenders that intend to lend at high LTIs above 15% to be prepared to manage their flow down towards 15% in the event the regulators judge the aggregate flow to be inconsistent with 15% and that adjustments are required to ensure the aggregate flow becomes consistent with 15% again. Firms lending below the de minimis threshold would not be subject to these expectations.^{footnote [6]}

Relevant changes in risk appetite

2.12 The PRA’s proposals, consistent with PRA fundamental rules, set out that firms should discuss with their supervisors, as part of their regular engagement, material changes to their risk appetite and/or strategy intended to increase their anticipated future flow of high LTI lending above 15%. The FCA’s proposals, consistent with Principle 11 in the FCA Handbook, set out that FCA firms should notify the FCA of material changes to their risk appetite and/or strategy intended to increase their anticipated future flow of high LTI lending above 15%. This would assist the regulators in monitoring which firms anticipate lending at levels above 15% and inform our view on the trajectory of the aggregate flow measure, as well as informing supervisory input as necessary.

Managing the aggregate consistently with the FPC’s Recommendation

2.13 The regulators propose that lenders should have flexibility to determine their own individual high LTI lending strategies. To ensure that the aggregate remains consistent with 15%, as per the FPC recommendation, there may be instances where the regulators expect firms to gradually reduce their high LTI flow towards 15%.

2.14 The regulators propose a framework that allows individual firms to increase their individual high LTI flow beyond 15% so any ‘spare capacity’ can be used when the aggregate flow measure is consistent with the FPC limit. If the aggregate flow measure is considered by the regulators to be inconsistent with the 15% limit and adjustments are necessary to ensure the aggregate becomes consistent with 15% again, then firms with a flow above 15% would be expected to gradually and smoothly reduce their share towards 15% until the regulators state otherwise. Firms with a flow below 15% would be expected not to increase their share above 15% until the regulators state otherwise.

2.15 Where more than one firm within a group is above the ‘de minimis’ threshold, the flow would be measured at group level to provide flexibility in determining where the adjustments should be made. Any firms below the de minimis threshold would not contribute to the flow calculation of the group.

2.16 The regulators propose that the share of high LTI lending in aggregate and for individual firms will be measured using fixed quarters rather than a four-quarter rolling average.^{footnote [7]} Under the new proposals, when gradual adjustments are expected of firms lending over 15%, a four-quarter rolling average would not be reflective of firms’ most recent lending. Expecting firms to reduce lending toward 15% using a four-quarter rolling average could result in over-correction. The regulators propose that measuring on a fixed quarter basis is a simpler approach that would not require firms to adjust by more than is necessary.

2.17 The regulators set out in the draft SS and guidance the general approach to managing the aggregate if it is inconsistent with 15% but the specific degree to which reductions are expected would depend on the nature of the overshoot. The regulators would publish market-wide expectations for firms with a flow above 15% to reduce their high LTI flow if the aggregate flow is considered to be inconsistent with 15% and adjustments are necessary to ensure the aggregate flow becomes consistent with 15% again.

2.18 The regulators propose that, based on the most recent quarter of Product Sales Data (PSD), if the regulators judge the aggregate flow to be inconsistent with 15% and adjustments are necessary to ensure the aggregate flow becomes consistent with 15% again, firms will be expected to reduce their individual high LTI flow by a fraction, applied to the amount their individual flow measure exceeds 15%.^{footnote [8]} This fractional reduction of the amount the individual flow measure exceeds 15% would be expected each quarter until the regulators say otherwise. For example, the regulators could communicate to all firms lending above 15% that they should reduce their share of high LTI lending by one fifth of the difference between their most recent level and 15%, iteratively.^{footnote [9]} From the point of such announcement being made, firms would be able to calculate their path to gradually reducing their high LTI flow towards 15%.

2.19 The regulators are not prescribing in advance what fraction would be used for the adjustments. This gives the regulators flexibility to return the aggregate to a level consistent with 15% in a timely and smooth manner, without requiring excessive adjustments that cause unnecessary market disruption. The fraction would be applied consistently for all firms lending over 15%. The examples in Appendix 6 illustrate the steps that firms could be expected to take in more detail.

2.20 The regulators consider the proposals to be proportionate in both nominal and relative terms. This proportionate approach means that firms which choose to lend the furthest above the 15% level would be required to make the largest relative adjustments each quarter. By expecting the adjustment in terms of a firm’s high LTI flow, the scale of the adjustment is relative to the volume and value of mortgages that the firm typically extends.

2.21 The regulators propose that any specific expectations for future flow reductions would be set out on the same PRA webpage that publishes the latest aggregate flow measure. The FCA proposes to set out expectations for FCA firms on its website. Following this, firms would take action as necessary to meet expectations. Firms would not be expected to withdraw existing mortgage offers as a consequence. The regulators recognise that there is a significant time lag between mortgage offer and completions, as well as the subsequent submission of regulatory data.^{footnote [10]} As such, reductions in individual flow measures are not expected to be accurately reflected in data until three subsequent quarters have passed.

2.22 When setting out these expectations, the regulators would not specify how many consecutive quarters of adjustments will be necessary. The regulators would publish another statement setting out that further adjustments are not required when the aggregate high LTI flow was consistent with the 15% limit. The aggregate measure comprises of all in-scope firms, whether they are above or below the 15% level, meaning the necessary duration of adjustments cannot be definitively determined in advance. By expecting firms to iteratively reduce their high LTI flow towards 15% until told otherwise, the aggregate would over time become consistent with the 15% limit, irrespective of any increases in lending by the firms beneath 15%.

2.23 The regulators recognise that aggregate high LTI lending can be a volatile metric. As a result, there may be circumstances where the aggregate is judged by the regulators to be inconsistent with a limit of 15%, but the regulators view that adjustments would not be necessary to make the aggregate consistent with 15% again. For example, if the aggregate were to go over 15% but the regulators judge that this will not be persistent over more than one quarter. If subsequent data revealed that the aggregate was still inconsistent with a limit of 15% then the regulators could update their judgement and expect firms to begin adjustments.

Calculation and publication of aggregate high LTI

2.24 The regulators propose that they would calculate the percentage of aggregate flow of high LTI lending and publish it on the PRA website each quarter.^{footnote [11]} This would provide firms with additional transparency to manage their own flow of high LTI lending above 15% taking the current aggregate, and the likelihood of any required adjustments, into account.

Scope of mortgages

2.25 The regulators propose to amend the PRA’s rules and FCA’s general guidance to exclude further advances and retirement interest only mortgage contracts from the LTI flow limit.^{footnote [12]}

2.26 The proposed amendments aim to clarify the exclusions and ensure consistency across publications. Retirement interest-only mortgages and further advances were both out of scope of the original policy implementation in 2014. Retirement interest-only mortgages were inadvertently brought in scope when they were defined separately from lifetime mortgages in the FCA’s glossary terms in 2018. The original policy publication proposed to exclude further advances but this was not explicitly listed in the PRA’s rules or FCA’s general guidance. Since the policy was first implemented, the PRA has not included either of these mortgage types when measuring the flow of high LTI mortgages.

2.27 The PRA proposes to amend Rule 1.11 of the Housing Part to update the mortgage types that are excluded in the definition of ‘regulated mortgage contract’, used for the purposes of the establishing what mortgages are relevant to the LTI flow limit.

2.28 The FCA proposes to exclude these mortgage types in its new general guidance.

2.29 The regulators will continue to work together to keep excluded mortgage types under review. 

PRA modification by consent and FCA individual guidance

2.30 The regulators consider that the PRA MbC and FCA individual guidance offerings should continue to be made available for the duration of this interim period, until such time as any new proposals come into effect. The regulators have extended the interim measures to 31 Dec 2026 or, if earlier, the date on which the rules in Chapter 2 of the Housing part of the PRA Rulebook and the FCA’s relevant general guidance (FG25/4) are amended or revoked respectively. Firms should confirm if they wish to take advantage of the new date.^{footnote [13],footnote [14]}

2.31 Under the PRA’s interim measure, PRA firms are required to provide details of any material changes to the firm’s business plan, risk appetite and risk management framework in respect of any increase in high LTI lending. The PRA considers that the information provided by firms to meet these requirements would be in-line with the proposed governance and risk management expectations, set out in paragraph 2.3 of the PRA’ draft SS.

2.32 The FCA expects FCA firms lending high LTI mortgages consider the degree of risk associated with their level of high LTI lending and incorporate it into their risk management systems and controls in a way that ensures they continue to comply with all relevant obligations, for example those set out in SYSC.

2.33 Under these interim measures, firms are required to provide projections for their high LTI flow and monthly data on mortgage approvals and completions. This has been beneficial for the regulators, primarily in monitoring the direction of travel for the aggregate and the likely use of the flexibility for additional high LTI lending set out in these proposals. However, the regulators acknowledge the costs associated with this data reporting and do not propose collecting this additional data as part of the new policy proposals. Discussion of the latest flows will instead be covered in the course of normal supervisory conversations or as required. Firms that continue to have an MbC or FCA individual guidance will be required to continue sharing this data until the MbC or FCA individual guidance ceases to have effect.

PRA objectives analysis

2.34 These proposals are intended to meet the FPC recommendation by ensuring the flow of high LTI lending remains consistent with 15% in aggregate while allowing individual lenders the flexibility to lend above 15%. Maintaining a 15% limit in aggregate will continue to guard against the build-up of excessive levels of household indebtedness which could, following a shock, result in economic instability and so in turn threaten the PRA’s primary objective of safety and soundness of firms.

2.35 The PRA is content to remove the current 15% limit from a firm-specific safety and soundness perspective as the new proposed rule and the proposals in Chapter 2 of the PRA draft SS outline that firms undertaking high LTI lending are expected to do so prudently with due consideration of how it may impact their own resilience. The PRA also recognises that risks associated with high LTI lending, for example where it is correlated with higher LTV ratios, are addressed by other areas of the prudential framework.

2.36 The PRA has assessed whether the proposals in this CP facilitate its secondary objectives related to effective competition, the international competitiveness of the economy and the growth of the economy in the medium to long term. The PRA anticipates that the proposals will lead to greater usage of the aggregate limit and increased competition arising from greater flexibility for firms to set their own risk appetite for high LTI lending, which should encourage a broader range of business models. Applications received for the MbC reflect that the current policy has acted as a constraint for some firms which otherwise have an appetite to increase high LTI lending. The PRA also anticipates that the proposals may increase homeownership rates as first-time buyers have accounted for an increasing share of high LTI lending.^{footnote [15]}

PRA Cost benefit analysis (CBA)

2.37 This section sets out the PRA’s analysis of the expected costs and benefits associated with implementing the proposals outlined in this CP. The CBA is underpinned by a set of assumptions that reflect the available data and the PRA’s proportionate approach to assessing firm-level impacts. The proposals in this CP are expected to provide net benefits to borrowers and firms.

2.38 Detailed information on the PRA CBA is provided in Appendix 1.

2.39 The PRA’s CBA Panel (‘the Panel’) was consulted in the preparation of this CBA. The Panel provided feedback and advised on approaches to assessing a broad range of causal chains, as well as gauging the costs and benefits. The CBA presented in this CP addresses the Panel’s feedback. Specifically, the Panel asked for the following:

• The CBA Panel suggested possible impacts on competition that should be considered in the CBA. These included consideration of how firms' expectations that they may need to adjust to reduce high LTI lending in the future might impact or possibly constrain competition. Other matters included the differential impact on small and large firms and whether increased specialisation by firms would have positive or negative effects. The section on market outcomes and competition of the CBA address these considerations (paragraphs 35-43, Appendix 1).
• The CBA Panel suggested examining historic changes in firms’ lending flows to get a sense of how volatile they could be over time. Chart 1 in Appendix 1 shows data on historic levels.
• The CBA Panel suggested that comparative analysis of other jurisdictions' equivalent policies could inform the assessment of potential market outcomes and queried whether removal of firm-specific limits would lead to an increase in volumes given that lending by unconstrained firms may have been offsetting the reduction in lending by constrained firms. Research provides evidence relevant to the potential impact of the change on volumes (paragraph 42, Appendix 1).
• The CBA Panel queried the potential impact of the change on firms' resilience. The proposals in Chapter 2 of the PRA draft SS set out new expectations on risk management for high LTI lending. This ensures that firms undertaking high LTI lending do so with consideration of how it may impact their own resilience. The CP also notes that the many risks associated with high LTI mortgage lending are addressed by other parts of the prudential framework (paragraph 2.35 above).

PRA Have regards analysis

2.40 In developing these proposals, the PRA has had regard to its framework of regulatory principles, including the latest HMT Recommendations letter. The regulatory principles that the PRA considers are most material to the proposals include:

1. The principle that the PRA exercises its functions in a way that recognises differences in the nature of, and objectives of, businesses carried on by different persons (including different kinds of person such as mutual societies and other kinds of business organisation): The PRA considers that the proposal will support lenders making use of their individual LTI flow limits and greater flexibility for firms to set their own risk appetite for high LTI lending will support different business models.
2. The principle that the PRA should exercise its functions in a way that supports the contribution of the financial services sector to overall economic growth and the real economy as well as creating a regulatory environment which facilitates growth through supporting competition and innovation: As lenders take advantage of the greater flexibility around high LTI lending, the proposal will encourage a broader range of business models which in turn could deliver efficiency gains and improve the quality or variety of products on offer.
3. The principle that the PRA should reinforce financial inclusion and support home ownership to enable individuals to access the financial services and products they need to fully participate in the economy including the government’s commitment to making home ownership more accessible and supporting first-time buyers who struggle to save for a large deposit: The PRA considers that an increased supply of high LTI mortgages could meet previously unmet demand from creditworthy individuals, including first time buyers and borrowers who lack financial support or are on average to lower incomes. First-time buyers have accounted for an increasing share of high LTI lending (in 2025 Q2 they made up 54% of all high LTI lending volume).
4. The principle that the PRA should exercise its functions as transparently as possible as well as the desirability in appropriate cases of the PRA publishing information relating to firms on which requirements are imposed: The PRA is proposing to make information about the aggregate share of high LTI lending available through a public webpage on a quarterly basis. This will allow firms that will lend close to, or in excess of 15%, to monitor the aggregate share of high LTI lending in order to anticipate any action they may be expected to take to reduce their future flow.

2.41 The PRA has had regard to other factors as required. Where analysis has not been provided against a ‘have regard’ for this proposal, it is because the PRA considers that ‘have regard’ not to be a significant factor for this proposal.

3: Other PRA Legal Requirements

Statutory Duty to Consult

3.1 The PRA has a statutory duty to consult when introducing new rules/changing rules Financial Services and Markets Act 2000 (FSMA) s138J, or new standards instruments (FSMA s138S). When not making rules, the PRA has a public law duty to consult widely where it would be fair to do so.

3.2 The Practitioner’s Panel were not consulted about the proposals in this CP.

Impact on mutuals

3.3 The PRA considers that the impact of the proposed rule changes may especially benefit building societies, because their business models are focused on supporting mortgage borrowing for members and customers and they are more constrained than banks in the types of lending they can extend.

Equality and diversity

3.4 In developing its proposals, the PRA has had due regard to the equality objectives under s.149 of the Equality Act 2010. The PRA may not act in an unlawfully discriminatory manner. It is also required under the Equality Act 2010 to have due regard to the need to eliminate discrimination and to promote equality of opportunity in carrying out its policies, services and functions. As part of this the PRA assesses the equality and diversity implications of any new policy proposals considered.

3.5 Under the current rules, the 15% high LTI limit may impact those of a younger age more substantially as it is this group that is more likely to seek such mortgages. While the PRA does not consider this to be unlawful discrimination, the PRA views that the new proposal mitigates the risk of any less favourable treatment of younger groups as it offers more flexibility for mortgage lenders to extend their high LTI flow above 15%.

4: FCA Compatibility Statement

The Compatibility Statement

4.1 This section records the FCA’s compliance with a number of legal requirements applicable to the proposed amendments to the general guidance in this consultation, including the reasons for concluding that the proposed amendments are compatible with certain requirements under FSMA. 

4.2 Section 1B of FSMA requires the FCA, when discharging its general functions (which include giving general guidance), as far as reasonably possible, to act in a way which is compatible with its strategic objective and advances one or more of its operational objectives. Under the Legislative and Regulatory Reform Act 2006 (LRRA) the FCA is subject to requirements to have regard to a number of high-level ‘Principles’ in the exercise of some of its regulatory functions and to have regard to a ‘Regulators’ Code’ when determining general policies and principles and giving general guidance (but not when exercising other legislative functions like making rules). This section sets out how the FCA have complied with requirements under the LRRA. 

The FCAs objectives and regulatory principles: compatibility statement 

4.3 The implementation of the FPC’s new recommendation on loan to income ratios continues to advance the FCA’s market integrity objective as it continues to lead to macroeconomic stability by reducing the chance of an unsustainable credit boom, which in turn leads to a more sound, stable and resilient financial system. Doing so is also compatible with the FCA’s strategic objective of ensuring that the relevant markets function well. For the purposes of the FCA’s strategic objective, ‘relevant markets’ are defined by section 1F of FSMA. 

4.4 These proposals also advance the FCA’s operational objective of promoting effective competition in the interest of consumers, arising from greater flexibility for firms to set their own risk appetite for high LTI lending, which should encourage a broader range of business models. 

4.5 These proposals are consistent with the FCA’s operational objective to protect consumers. The proposals are expected to benefit consumers through improved access to homeownership and expanded choice. Some risks remain for consumers seeking high LTI loans, particularly relating to increased indebtedness and potential arrears. However, these risks are mitigated by the FCA’s affordability assessment rules, the expectation firms provide tailored support for customers who have or may have financial difficulties, the Consumer Duty, and supervisory oversight. These regulatory requirements and oversight continue to provide appropriate protections for consumers, including in the event of an economic downturn.

4.6 While the FCA note there is potential for increased indebtedness which could reduce disposable income and spending, particularly during an economic downturn, by enabling more lending to borrowers this could in turn increase homeownership rates, encourage more housebuilding, and make it more attractive to invest in the UK mortgage market. On balance, the FCA consider the proposals advance the FCA’s secondary international competitiveness and growth objective.

4.7 In preparing the proposals set out in this consultation, the FCA have had regard to the regulatory principles set out in section 3B of FSMA. 

The need to use FCA resources in the most efficient and economic way

4.8 The FCA’s proposed amendments to the guidance should not lead to significant changes in the FCA’s supervision approach and is not likely to have a material impact on its use of resources. The FCA will likely incur marginal additional supervisory costs as the proposed approach builds on existing data analysis and processes.

The principle that a burden or restriction should be proportionate to the benefits

4.9 The FCA’s proposed amendments to the guidance should not lead to any additional burden or restriction, with firms able to increase their proportion of high LTI lending to at least 15% at any time, as they can under the existing framework.

The desirability of sustainable growth in the economy of the United Kingdom in the medium or long term

4.10 The FCA’s proposed amendments to the guidance should support sustainable growth in the economy of the United Kingdom in the medium or long term. The proposals, as set out at paragraph 4.6, could increase homeownership rates, encourage more housebuilding, and make it more attractive to invest in the UK housing and mortgage market. However, increased indebtedness could reduce disposable income and spending, particularly during an economic downturn, and the extent of the impact on housebuilding is limited by constraints beyond the FCA’s control.

The general principle that consumers should take responsibility for their Decisions

4.11 The FCA proposed amendments to the guidance do not alter the principle that consumers should take responsibility for their decisions.

The responsibilities of senior management

4.12 The FCA proposed amendments to the guidance do not alter the responsibilities of senior management for FCA firms who intend to maintain their share of high LTI lending at levels below or equal to 15%. The FCA consider the proposed responsibilities of senior management discussed at paragraph 2.8 is appropriate for FCA firms that want to increase their share of high LTI lending above 15%. This is because those firms may be required to manage their flow down towards 15% and should have appropriate governance and oversight in order to do so.

The desirability of recognising differences in the nature of, and objectives of, businesses carried on by different persons including mutual societies and other kinds of business organisation

4.13 The FCA’s proposed amendments to the guidance recognise the differences in the nature and objectives of the businesses the FCA regulates and do not adversely impact a subset of businesses. 

The desirability of publishing information relating to persons subject to requirements imposed under FSMA, or requiring them to publish information

4.14 The FCA’s proposed amendments to the guidance mean the aggregate flow will be published each quarter on the PRA’s website and supplemental guidance for relevant FCA firms could be published on the FCA’s website. The FCA consider the publication of this information is necessary to implement the FPC’s recommendation. 

The principle that the FCA should exercise its functions as transparently as possible 

4.15 The proposed amendments to the guidance are being consulted on, and the FCA will publish details of the representations it receives and how the FCA have responded to the representations ensuring it exercises its functions as transparently as possible. 

Legislative and Regulatory Reform Act 2006 (LLRA) 

4.16 The FCA have had regard to the principles in respect of its proposals that consist of amendments to its general guidance. The FCA consider that the proposals are proportionate and result in an appropriate level of consumer protection and market integrity when balanced with their impact on firms and on competition.