The Bank of England is recommending a relaxation of mortgage lending rules that would allow individual banks and building societies to issue more high loan-to-income (LTI) mortgages, in a move aimed at making home ownership more accessible.
In its latest Financial Policy Committee (FPC) update, the central bank said it supports allowing lenders to exceed the current 15% cap on mortgages with LTIs above 4.5 – a level typically viewed as riskier for borrowers. Under the proposed changes, the 15% limit would still apply across the market in aggregate, but individual lenders would be given more flexibility to lend beyond that threshold.
The LTI cap was first introduced in 2014 as part of efforts to prevent excessive borrowing and reduce the risk of household debt triggering wider economic instability. However, with housing affordability still a pressing concern, the Bank now believes there is room to ease the rule for individual institutions.
In a statement, the FPC said it recognised its role in “supporting the Government’s priority to make home ownership more accessible” and discussed the implications of mortgage regulation on the UK housing market.
It added: “The Committee judged that the aggregate 15% limit continued to strike the right balance between providing protection from risks associated with household over-indebtedness, while offering sufficient capacity for otherwise creditworthy households to borrow at higher LTIs.”
The change, if implemented by the Prudential Regulation Authority and the Financial Conduct Authority, could allow more first-time buyers or lower-income borrowers to access larger mortgages — especially in areas where house prices have far outpaced wage growth.
However, critics warn that loosening restrictions could reignite concerns around household debt and affordability, particularly if interest rates remain elevated or economic conditions deteriorate.
The Bank said it expects regulators to ensure the market as a whole continues to stay within the 15% cap, even as individual lenders are granted more discretion in issuing high LTI mortgages.
