Consultation opens
03/04/2025
03/04/2025
Consultation closes
08/05/2025
CP25/6: Proposed amendments to PRA Rulebook and FCA Guidance concerning the de minimis threshold for the Loan to Income flow limit in mortgage lending
Proposed amendments to the Prudential Regulation Authority's (PRA) Rulebook and the FCA’s general guidance on the Financial Policy Committee's (FPC) recommendation on loan to income (LTI) ratios in mortgage lending.
Why we are consulting
The FPC has recommended increasing the volume of mortgages a lender needs to make the LTI flow limit apply from £100m per four rolling quarters, to £150m per four rolling quarters. The Prudential Regulation Authority (PRA) give this effect through their Rulebook, and we give this effect through guidance, revised in February 2017 (FG17/2) and need to update this.
Who this applies to
This consultation is relevant to mortgage lenders subject to the PRA’s rules, described in paragraph 2.7 of the consultation paper (CP), and to FCA-authorised mortgage lenders that are not a subsidiary of PRA-authorised firms.
How to respond
We are asking for comments on this CP by 8 May 2025. We are accepting responses on behalf of both the FCA and the PRA. Both authorities will consider the responses received and resolve any issues raised.
You can send your comments to us using the form on our website, or by email to mailto:[email protected] or in writing to:
Mortgage Policy Team
Financial Conduct Authority
12 Endeavour Square
London
E20 1JN
Next steps
Subject to comments received, the consultation period will be 5 weeks due to the narrow scope of the proposal. This will allow us to implement the change more swiftly, bringing benefits to firms sooner.
Background
The LTI flow limit ensures 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 per annum.
Currently the de minimis threshold exempts from the LTI flow limit lenders that extend residential mortgages of less than £100m in value or fewer than 300 in number per annum.
The change would address inadvertent regulatory tightening by increasing the value of residential mortgage lending that small lenders can extend before becoming subject to the LTI flow limit, thereby contributing to the regulators` objectives on competition, and therefore competitiveness and growth.
The FCA is required to consult when changing general guidance. The PRA has a statutory duty to consult when changing rules (FSMA s138J).
This consultation is separate to the FCA’s Mortgage Rule Review.