Following recommendations by the FPC, the PRA is reviewing the loan to income (LTI) ratio requirements, and offering a modification by consent in the meantime for firms to disapply the relevant rule.
The current provision requires mortgage lenders to limit the number of new residential mortgage loans in line with an LTI ratio at, or greater than 4.5 to no more tan 15% of their total number of new mortgage loans per year. The FPC recommended the PRA and FCA amend implementation of its LTI flow limit to allow individual lenders to increase their share of lending at high LTIs while aiming to ensure the aggregate flow remained consistent with the limit of 15%. It recognised that such high LTI lending by individual lenders could exceed 15% of their total number of new residential mortgages while the aggregate flow remained consistent with the 15% limit. In light of this, the PRA is reviewing the LTI ratio requirements.
While the review takes place, the PRA is offering a modification by consent that will allow lenders to disapply the 15% limit with immediate effect.