CP6/26 – High loan to income lending
Executive Summary
CP6/26 from the PRA consults on reforms to the **high loan-to-income (LTI)** lending rules for residential mortgages, building on prior adjustments to the flow limit that caps high-LTI loans (≥4.5x borrower income) at 15% of total new lending for larger lenders. This matters for mortgage providers as it aims to balance financial stability, support housing market growth, and adapt macroprudential measures to current economic conditions, potentially influencing lending capacity and risk management ahead of the June 2026 review deadline (https://www.bankofengland.co.uk/prudential-regulation/publication/2026/april/high-loan-to-income-lending-consultation-paper). #
What Changed
- - Review of LTI flow limit: PRA is reviewing the rule limiting new residential mortgages with LTI ≥4.5x to 15% of total new lending, following FPC recommendations; no final changes proposed yet, but interim modifications available until 30 June 2026
- Threshold increase (prior update): Flow limit now triggers only for firms issuing ≥£150M in residential mortgages annually (up from £100M), effective 11 July 2025, exempting ~80 smaller lenders (up from 70).
- Interim modification by consent: Firms can apply to disapply the 15% cap temporarily; requires submitting business plans, risk frameworks, and monthly reporting on high-LTI volumes.
- Exclusions remain: No LTI limit for re-mortgages (no principal change), lifetime mortgages, or second/subsequent charge mortgages (per historical rules).
- Group allocations: Firms in groups can share high-LTI allowances, with record-keeping required.
Suggested Considerations
- Apply for modification (if seeking >15% high-LTI): Submit detailed business plan (incl. quarterly high-LTI projections), risk appetite, management frameworks; provide monthly notifications on approvals/completions.
- Monitor thresholds: Track rolling 4-quarter mortgage volumes/contracts (≥£150M and ≥300 contracts in two periods triggers limit).
- Record-keeping: Document high-LTI allowances, group allocations, exclusions.
- Respond to consultation: Provide feedback on CP6/26 proposals via PRA channels (deadline not specified in summary; check full paper).
- Engage regulators: FCA firms contact FCA for tailored guidance on high-LTI increases.
Key Dates
Compliance Impact
Urgency: High – Firms near £150M threshold or planning high-LTI growth must act imminently on modifications (monthly reporting starts soon) to avoid breaches before June 2026 expiry; non-compliance risks enforcement, while opportunities for smaller lenders enhance competitiveness amid housing market pressures (https://www.bankofengland.co.uk/prudential-regulation/publication/2026/april/high-loan-t
Who is Affected
References
AI-generated analysis. May contain errors or omissions — verify with the original PRA source before acting. Full disclaimer.
Summary
Consultation paper 6/26