The Prudential Regulation Authority and the Financial Conduct Authority have confirmed that they will raise the de minimis threshold for the loan-to-income (LTI) flow limit in residential mortgage lending from £100 million to £150 million a year.
The decision, announced in Policy Statement 11/25, follows a joint consultation in May 2025 and aims to ensure that small lenders are not inadvertently burdened by outdated thresholds set more than a decade ago.
The LTI flow limit requires lenders to restrict the proportion of new residential mortgages with a loan-to-income ratio of 4.5 or more to no more than 15% of their total annual lending.
The exemption threshold, originally set in 2014, was recommended for adjustment by the Financial Policy Committee last year to reflect UK nominal GDP growth and avoid regulatory drag.
The revised threshold is set to take effect from 11 July 2025 and will apply to lenders offering more than £150 million in new residential mortgages annually. Around 80 lenders are now expected to benefit from the exemption, up from the current 70.
The changes affect both PRA-authorised firms and those mortgage lenders regulated solely by the FCA.
CALLS FOR MORE
Despite broad support during the consultation period, some respondents had urged the regulators to go further, proposing thresholds of £200 million or even £250 million to better promote competition and support first-time buyers. However, the PRA and FCA have decided to proceed with the FPC’s recommendation without further amendment.
The regulators stressed that the revised figure maintains the original calibration and risk appetite set in 2014.
There were also calls to revisit the LTI flow limit itself, including proposals to raise the 15% cap, introduce tiered approaches, or exempt longer-term fixed-rate products. However, these broader issues fall outside the scope of the current consultation. The regulators noted that such feedback would be considered as part of ongoing discussions by the FPC, which in April 2025 said it would examine whether any impediments exist for lenders wishing to use their full LTI allowances.
Rachel Springall, spokesperson at Moneyfactscompare.co.uk, welcomed the revised threshold as “a step in the right direction to give smaller lenders more scope to support borrowers”, but cautioned that the changes may not go as far as some lenders had hoped.
“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,” she said.
Springall pointed to recent calls from senior figures at Yorkshire Building Society, Nationwide and Skipton to increase the LTI cap from 15% to 20%, particularly in support of first-time buyers.
The three mutuals, which collectively account for 35% of first-time buyer lending, have urged policymakers to allow greater flexibility in lending, especially amid continued affordability pressures.
