Regulators have opted to remove mortgage loan-to-income limits for lenders with a residential loan book of less than £150 million – meaning more smaller lenders don’t have to abide by the rules.
The LTI flow limit means the number of mortgage loans at an LTI ratio of over 4.5 times cannot make up more than 15% of the total of new mortgages per year.
Previously the limit applied for those above the £100 million – a rule that has applied since 2024 – but from Friday that rises to £150 million.
This means the number of lenders exempt from the rules will rose from around 70 to 80.
The decision was made by the Prudential Regulation Authority and the Financial Conduct Authority.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “This is a step in the right direction to give smaller lenders more scope to support borrowers, but for some it might not be as much relaxation as they were hoping.
“There have been no other changes stipulated at this time, which might disappoint those who were hoping for a change to the loan-to-income (LTI) flow limit.”
Last month, the CEOs from Yorkshire Building Society, Nationwide Building Society and Skipton Building Society both called for the LTI limit to be raised to 20% from 15% to allow them to lend to more potential homeowners.
This was sent as a letter to the Treasury Committee and reaffirmed the point that building societies are responsible for 35% of first-time buyer lending.
In April the FCA launched a consultation on increasing LTI limits –respondents wanted higher thresholds of £200 million and £250 million, but the regulators opted for a more conservative approach.
In a joint statement, the regulators said the update “addresses the impact of inadvertent regulatory tightening due to growth in the UK economy since the threshold was first implemented”.