Bank of England Removes Individual Lenders’ 15% Cap on High Loan-to-Income Mortgages

Britain’s mortgage regulators have confirmed plans to remove the 15% limit on the share of high loan-to-income mortgages that individual lenders can issue, while retaining a market-wide safeguard against excessive household borrowing. The Prudential Regulation Authority (PRA), part of the Bank of England, and the Financial Conduct Authority (FCA) published their final decision on October 14, with the new framework taking effect on October 28, 2026.

The change concerns mortgages worth at least 4.5 times the borrower’s income, or the combined income of joint borrowers. Until now, the rules generally restricted the proportion of those loans within an individual lender’s new mortgage business. Under the new approach, a lender can move above 15% if its own risk controls support doing so and overall market lending remains consistent with the authorities’ 15% limit.

That distinction is central to the decision. The regulators are not abolishing the high loan-to-income safeguard or promising borrowers larger mortgages. Instead, they are allowing banks and other lenders with different business models to use more of the capacity available across the mortgage market, subject to continued oversight.

From individual caps to a market-wide safeguard

The joint PRA and FCA policy statement, designated PRA PS19/26 and FCA PS26/20, changes how a restriction first introduced after the financial crisis is applied. In 2014, the Bank’s Financial Policy Committee (FPC) recommended limiting mortgages at or above 4.5 times income to 15% of new lending. The objective was to prevent a widespread build-up of household debt that could amplify an economic shock.

The 15% threshold refers to the number of mortgages in the relevant lending flow, not to the interest rate charged, the size of a deposit or a universal maximum income multiple for every applicant. High loan-to-income mortgages were already permitted within the earlier allowance. The policy now changes which institutions can use that allowance and how regulators respond if the market gets too close to, or moves beyond, the aggregate benchmark.

The FPC recommended the shift in July 2025 after considering how lenders used the existing headroom. Some firms had little appetite for higher income-multiple lending; others were constrained by an individual limit even though the market as a whole had unused capacity. Banks also tended to maintain buffers below the ceiling rather than risk breaching it because of unpredictable mortgage completions.

Temporary arrangements introduced in July 2025 already allowed PRA-regulated firms to seek a modification of the old restriction, while relevant FCA-regulated lenders could apply for individual guidance. The October decision makes the revised approach part of the regular regulatory framework. Firms using those interim arrangements will not need to take further action when the new rules come into force; the temporary directions will lapse automatically.

The PRA’s revised rules and supervisory statement cover firms it prudentially regulates and relevant subsidiaries, including banks and building societies. The FCA has issued replacement guidance for mortgage lenders outside that PRA framework. Both regulators will assess how lenders manage high income-multiple loans rather than simply enforce the same numerical ceiling at every institution.

High-LTI lending reached 14.1% of covered mortgages

The policy is being finalized as high loan-to-income lending uses an increasing share of the available market allowance. Figures released by the PRA alongside the decision show such mortgages accounted for 14.1% of contracts covered by the limit in the second quarter of 2026, up from 12.9% in the first quarter and 11.5% in the final quarter of 2025. The comparable share was 9.7% in the third quarter of 2025.

About 29,240 high-LTI mortgages were completed during the second quarter, out of approximately 208,090 contracts within the policy’s scope. Those are not all mortgage sales: the PRA recorded roughly 746,200 regulated mortgage sales in the broader dataset for the quarter, including categories excluded from the high-LTI calculation. Using the larger total as the denominator would give a misleading impression of how much of the 15% allowance is being used.

The policy’s exclusions include buy-to-let mortgages, second-charge mortgages, further advances, lifetime mortgages, retirement interest-only mortgages and remortgages without an increase in the outstanding principal. The PRA’s published figures also cover lending by firms above the existing small-lender exemption threshold. The reported volumes are rounded and can be revised as regulatory submissions are updated.

Regulators will assess the aggregate share using each calendar quarter’s lending data, and the PRA will publish the figure quarterly. The latest release says no lender-wide reduction expectations are currently in place. A market reading above 15% would not automatically mean every lender must immediately reduce mortgage offers; the PRA and FCA would first assess whether the flow was inconsistent with the FPC’s recommendation and whether an adjustment was needed.

If intervention is warranted, firms lending above a 15% individual share could be asked to bring their high-LTI lending gradually back towards that level. Lenders below 15% would be expected not to move above it during an adjustment period. This provides a mechanism to protect the aggregate guardrail without restoring a permanent identical cap on each lender.

More flexibility, with affordability checks intact

One important change between the consultation and the final policy concerns the timeframe used to assess lenders. The regulators will monitor the market-wide position quarter by quarter but measure each firm’s high-LTI share and any required reductions over a rolling four-quarter period. That is intended to prevent volatile completion dates from forcing sudden changes to a lender’s mortgage criteria.

The shift followed feedback on the April consultation. The regulators received 15 responses, many supporting greater flexibility but several warning that quarterly mortgage completions can be difficult to predict. Respondents also questioned whether a uniform method for reducing higher-risk lending would treat smaller lenders or different business models fairly. The final policy retains the broadly consistent adjustment mechanism rather than introducing a separate test for each lender’s size or risk profile, while the existing exemption for the smallest firms remains.

Lenders that choose to devote more than 15% of their new, in-scope mortgages to high-LTI borrowing will need governance and risk controls suited to that strategy. The authorities expect them to assess concentrations, monitor performance, maintain appropriate management oversight and be capable of reducing their high-LTI flow if instructed. Material changes in lending strategy may also need to be discussed with, or notified to, the relevant regulator.

For borrowers, the practical effect could be a wider choice of lenders prepared to consider mortgages at 4.5 times income or above. The regulators expect greater flexibility to encourage competition and potentially improve access for some creditworthy households, including first-time buyers. Those outcomes are expectations, not guaranteed consequences of the rule change, and lenders remain free to impose their own tighter income-multiple policies.

The revised flow restriction also does not displace existing affordability assessments or other responsible-lending obligations. An applicant’s earnings, regular spending, deposit, credit circumstances and the lender’s affordability methodology still influence whether a mortgage is suitable and available. A lender with additional room under the market-wide allowance can still reject an application that fails its underwriting standards.

The PRA and FCA left the definition of a high-LTI loan at 4.5 times income and the aggregate benchmark at 15%, despite calls from some consultation respondents to revisit both. Those suggestions were referred to the FPC for consideration in future reviews rather than adopted in this decision. The revised rules and FCA guidance begin on October 28; the PRA plans to publish third-quarter 2026 market figures before the end of the fourth quarter.