For a rule that has shaped UK mortgage lending since 2014, the loan-to-income flow limit has always been a slightly odd creature. Simple on the surface, a cap on how many mortgages at 4.5 times income or above any single lender could write, but quietly distorting in practice. Lenders built management buffers beneath the 15% threshold. Some barely used their allowance. Others hit the ceiling and had to turn away borrowers they were perfectly happy to lend to. The aggregate number, the one the FPC actually cared about, rarely came close to the limit.
On 1 April 2026, the PRA and FCA published CP6/26, a consultation paper that proposes to fix that. The deadline for responses is 1 July 2026, with implementation expected in the second half of this year. And if you work in mortgage lending, broking, or distribution, this is worth reading carefully.
What’s actually changing
The headline is that the per-firm 15% cap is being removed from the PRA Rulebook and FCA guidance. That sounds dramatic. In practice, what the regulators are doing is shifting from a blunt tool to something more nuanced.
The FPC’s 15% aggregate limit remains. The policy intent has always been to prevent the economy from building up excessive household debt that could destabilise everything in a downturn. That hasn’t changed. What changes is how the limit is applied. Instead of every lender being restricted to 15% of their own flow regardless of what everyone else is doing, lenders can now set their own risk appetite and lend above 15% provided the market-wide aggregate stays consistent with the FPC’s limit.
To make this work, the PRA will publish quarterly data showing where the aggregate sits. If it drifts above 15% and the regulators judge that to be persistent, they’ll signal to lenders above the threshold to reduce their flow, gradually, using a fractional adjustment mechanism. The example in the paper uses one-fifth of the excess above 15% per quarter, though the regulators have reserved the right to set the fraction based on the circumstances. Lenders below 15% at that point would be told not to increase above it until further notice.
The measurement methodology is also changing. The rolling four-quarter average, which was introduced in 2017 to help firms manage their pipeline, is being replaced by fixed quarterly measurement. The regulators’ reasoning is straightforward: if you’re asking lenders to adjust their flow, a rolling average creates the risk of over-correction because it dilutes recent changes with older data.
Why this matters in practice
The current framework has created an obvious inefficiency. A lender with a cautious risk appetite who sits well below the 15% cap has never been the problem. The constraint has sat hardest on lenders who do want to extend more high LTI business, whether that’s a building society focused on first-time buyers or a challenger bank trying to carve out a specialist niche. The consultation paper is explicit that building societies are expected to benefit most from this change, and that makes sense given their membership-focused business models and the limitations on other types of lending available to them.
First-time buyers are the other group that should feel this. In Q2 2025, first-time buyers made up 54% of all high LTI lending, up from a historical average of 44%. The regulator is clearly aware that the existing framework has been acting as a drag on access to the market for buyers who are creditworthy, who can afford the repayments, but who can’t access large deposits. The reform is partly a response to that reality, and partly consistent with the government’s broader push on homeownership.
The governance expectations are worth understanding
Removing the per-firm cap doesn’t mean lenders can simply pile into high LTI business without internal scrutiny. The new PRA supervisory statement sets out clear expectations. Firms that choose to lend above 15% will need to demonstrate board-level oversight of their high LTI strategy, including monitoring against internal risk limits, tracking credit concentrations, and being able to show they could reduce their flow if the regulator asked them to.
Firms that stay below 15% face lighter-touch expectations, appropriate governance around their risk management framework, but not necessarily direct board involvement in the LTI position specifically.
There’s also a notification requirement. Lenders planning a material increase in their risk appetite for high LTI lending above 15% will need to flag that to their supervisor under PRA fundamental rules, or notify the FCA under Principle 11. This isn’t about seeking permission, but it gives the regulators visibility of what’s coming, which feeds into their view on where the aggregate is heading.
What this means for brokers
For mortgage brokers, the immediate practical question is whether lenders will actually use the new headroom. The history of the MbC process, the interim modification by consent that’s been available since July 2025 while this consultation was prepared, suggests some lenders are ready to move. Others will be more cautious, particularly those who want to see how the aggregate data is received before sticking their head above the parapet.
What brokers should expect is greater differentiation between lenders on high LTI appetite over time. A lender that decides to target first-time buyers with higher income multiples can now do so as a deliberate strategic choice rather than an exception managed against a regulatory ceiling. That’s a genuine product development opportunity, and the market will reflect it gradually as lenders build their propositions.
The scope clarifications are also worth noting. Retirement interest-only mortgages are formally excluded from the flow limit, correcting an inadvertent inclusion that crept in when the FCA redefined them separately from lifetime mortgages in 2018. Further advances are also explicitly excluded. Neither of these changed how lenders had been measuring things in practice, but the clarity is welcome.
The thing worth watching
The new framework hands a significant amount of discretion to the regulators. The fraction used to bring lenders back towards 15% when the aggregate overshoots is not prescribed in advance. The conditions under which the regulators will judge an overshoot as persistent, rather than a temporary blip, are left to their judgement. And the quarterly publication of aggregate data will become a closely watched number.
For lenders building a high LTI strategy, that creates a planning challenge that didn’t really exist before. Under the old rules, you knew where you stood. Under the new ones, your ability to continue lending above 15% is partly contingent on what your competitors are doing. If the market collectively pushes the aggregate up, you may be asked to pull back regardless of your own underwriting quality.
That’s not necessarily wrong, the system is designed to be flexible in both directions. But it does mean that the operational and governance infrastructure around high LTI monitoring will matter far more than it has until now. Lenders who treat this as just a lending policy change will miss the point. The ones who get ahead are those who build the data and reporting framework to understand their position relative to the aggregate, and to move quickly if the signal comes.
The consultation paper is open until 1 July 2026. If you have a view, it’s worth submitting one.
Source: PRA/FCA Consultation Paper CP6/26: High Loan to Income Lending, Bank of England, 1 April 2026.
