Copy article

Banks to lend more at higher loan-to-income levels but "potential risks here that need to be managed"

ended 09. July 2025

LENDERS will be able to offer more loans at higher loan-to-income (LTI) levels, the Bank of England announced today.

Under current rules, mortgage lenders must limit the number of new residential mortgage loans made with an LTI ratio at, or greater than, 4.5 to no more than 15% of their total number of new mortgage loans per annum.

The Financial Policy Committee has recommended the Prudential Regulation Authority and the Financial Conduct Authority (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%.

Though some were cautious, most brokers and property experts welcomed the move. Emma Jones, Managing Director at Whenthebanksaysno.co.uk, said: "Affordability is an ongoing issue for many prospective buyers so it's unsurprising that we have reached this point. However, we have to be careful that we do not revert to the Wild West that was the mortgage world in the years leading up to the Global Financial Crisis. 

“More loans at higher loan-to-income levels will be welcomed by borrowers but it should not come at the cost of putting people at risk.”

David Stirling, Director at Mint Mortgages & Protection, said this was a pragmatic move: “In a rare moment of pragmatism, the regulators have told lenders it's ok to bend the 15% LTI limit, just not all of them and not all at the same time. This should grease the wheels for first-time buyers and especially in expensive regions, such as London. The move adds welcome heat to the mortgage market but the challenge will be making sure it doesn’t turn into a blaze.”

Stephen Perkins, Managing Director at Yellow Brick Mortgages, said there are risks with this approach: “The challenge here is lenders will not know the aggregate and how much lending above current limits others are doing. No lender wants to be left behind watching market share go to others, so how will it be implemented to ensure all lenders are not above the 15%? Whilst this will be potentially great news for borrowers with increased affordability, there are potential risks here that need to be managed.”

Babek Ismayil, Founder at homebuying platform OneDome, said this is not a return to the dark days of lending before the crash in 2008: “Everyone is trying to crack the affordability conundrum at the moment, including the Bank of England. Anything that enables more people to get onto the ladder should be applauded as long as it is done responsibly. Lenders were burnt during the financial crash and I don't think this is putting us on a trajectory to that kind of lending. It is considered rather than gung-ho.”

Riz Malik, Director at R3 Wealth commented: “Lenders are likely to seize this opportunity to support buyers with smaller deposits as a result of this announcement. With the housing market showing resilience and the possibility for lower rates ahead, this move could bring more people into homeownership, and this liquidity helps everyone, no matter where they are on the property ladder. It's clear regulators are under pressure from the government to boost mortgage lending and they are listening to the powers that be.”

7 responses from the Newspage community

Copy all

Star Quote
Copy

Editor
Andrew Montlake
CEO at Coreco
This is a welcome and pragmatic move from the Bank of England that reflects the need to adapt to today’s housing and income realities. By loosening the reins ever so slightly, lenders can now offer more support to creditworthy borrowers—particularly first-time buyers—without compromising the overall stability of the market. It's not a return to reckless lending, but a recognition that sensible flexibility can make a real difference in helping more people get on the ladder. If implemented smartly, this could be a real shot in the arm for the market.
Copy

Editor
David Stirling
Independent Financial Adviser at Mint Wealth
In a rare moment of pragmatism, the regulators have told lenders it's ok to bend the 15% LTI limit, just not all of them and not all at the same time. This should grease the wheels for first-time buyers and also in expensive regions, such as London. The move adds welcome heat to the mortgage market but the challenge will be making sure it doesn’t turn into a blaze.
Copy

Editor
Emma Jones
Managing Director at Whenthebanksaysno.co.uk
Affordability is an ongoing issue for many prospective buyers so it's unsurprising that we have reached this point. However, we have to be careful that we do not revert to the Wild West that was the mortgage world in the years leading up to the Global Financial Crisis. More loans at higher loan-to-income levels will be welcomed by borrowers but it should not come at the cost of putting people at risk.
Copy

Editor
Stephen Perkins
Managing Director at Yellow Brick Mortgages
The challenge here is lenders will not know the aggregate and how much lending above current limits others are doing. No lender wants to be left behind watching market share go to others, so how will it be implemented to ensure all lenders are not above the 15%? Whilst this will be potentially great news for borrowers with increased affordability, there are potential risks here that need to be managed.
Copy

Editor
Riz Malik
Independent Financial Adviser at R3 Wealth
Lenders are likely to seize this opportunity to support buyers with smaller deposits as a result of this announcement. With the housing market showing resilience and the possibility for lower rates ahead, this move could bring more people into homeownership, and this liquidity helps everyone, no matter where they are on the property ladder. It's clear regulators are under pressure from the government to boost mortgage lending and they are listening to the powers that be.
Copy

Editor
Babek Ismayil
CEO at homebuying platform OneDome
Everyone is trying to crack the affordability conundrum at the moment, including the Bank of England. Anything that enables more people to get onto the ladder should be applauded as long as it is done responsibly. Lenders were burnt during the financial crash and I don't think this is putting us on a trajectory to that kind of lending. It is considered rather than gung-ho."
Copy

Sean Horton
Managing Director at Respect Mortgages
This measured relaxation should provide some relief for first-time buyers who've been priced out by strict affordability tests, but it's not a silver bullet for the housing affordability crisis. Lenders will still need to tread carefully and maintain affordability checks. The real test will be whether this translates into meaningful increases in mortgage approvals, or if lenders remain cautious about their risk appetite. For would-be borrowers, it's encouraging news, that will hopefully offer up more choices.