The UK Prudential Regulatory Authority and Financial Conduct Authority have set out details of a proposal to exempt more small lenders from its loan to income (LTI) flow mortgages with an LTI at 4.5 or above to limit the volume of new residential mortgages at that level to no more than 15% of their total mortgage book.

The Bank of England’s Financial Policy Committee’s (FPC) recommended in November 2024 that the threshold should increase from £100m to £150m per annum.

What is the LTI flow limit

The LTI flow limit limits the number of mortgages loans made at, or greater than 4.5x loan-to-income ratio to no more than 15% of lenders’ new mortgage loans. It aims to support economic stability by avoiding households taking on excessive levels of debt. This applies to lenders who extend residential mortgages above the threshold of £100m.

Why they are consulting to change the de minimis threshold:

The threshold has not increased since it was set in 2014. As the economy has grown, some lenders have now become subject to the LTI flow limit. Following the FPC’s recommendation, we and the PRA have worked at pace to deliver a consultation on increasing the limit to match the past 11 years of nominal GDP growth. The consultation proposes the limit to now apply to those who extend residential mortgages above £150mn per annum.

The change would ensure regulation in the financial services remains proportionate.

The consultation is open for feedback for five weeks until 7 May 2025.