The Bank of England is considering easing a key restriction on high-risk mortgage lending,
a move that could grant banks greater scope to issue larger loans amid pressure on regulators to improve housing affordability.
The central bank’s Financial Policy Committee (FPC) is exploring raising the threshold for mortgages with a high loan-to-income (LTI) ratio—from the current 4.5 times a household’s income to five times—the Financial Times reported on Saturday.
Such a change would allow more borrowers to secure larger mortgages relative to their income without being classified as "high-risk."
Under the current framework, mortgages amounting to 4.5 times or more of a borrower’s income (whether individual or joint) are categorized as high-LTI loans. The FPC has recommended that the share of such loans remain below 15% of the total volume of new mortgages in the market.
On October 28, the Bank of England’s Prudential Regulation Authority and the Financial Conduct Authority adjusted this framework, removing the 15% limit for individual lenders while maintaining an aggregate cap for the market as a whole.
According to the latest minutes from the FPC meeting, the share of high-LTI loans reached 14.1% in the current quarter, with a four-quarter rolling average of 12%.
Raising the threshold to five times income could unlock additional lending capacity equivalent to 7% of the annual volume of new residential mortgages, according to estimates by UK Finance cited by the FT. According to the publication, the volume of mortgage loans with a high loan-to-income (LTI) ratio issued to first-time homebuyers increased by 66% in 2025.
The Bank of England told the FT that it regularly reviews its housing policy tools, in line with the objectives of the Financial Policy Committee.
This review of regulations comes amid signs of a slowdown in the UK housing market. Data released by Nationwide on Friday showed that annual house price growth slowed to 0.5% in October, down from 0.8% in September, with prices remaining unchanged from the previous month. Rising mortgage costs and expectations of interest rate hikes are also putting pressure on buyer demand.