FG26/11: The Financial Policy Committee's recommendation on loan to income ratios in mortgage lending: general guidance

Key dates

2025-07-09

The FPC made the recommendation to amend implementation of the high-LTI flow limit, allowing individual lenders to increase their share while seeking to keep the aggregate flow consistent with 15%.

2026-04-01

The FCA consultation on the proposed high-LTI lending guidance opened.

2026-07-01

The FCA consultation closed.

2026-10-14

FG26/11, the joint FCA/PRA policy changes and the PRA supervisory statement were issued and the replacement framework took effect.

Suggested considerations

• Firms should map their regulated mortgage book against the 4.5 LTI definition, the listed exclusions and the £150 million or 300-contract de minimis test over the relevant consecutive four-quarter periods.
• Compliance and risk teams may wish to update policies, risk-appetite statements, underwriting controls and management information to reflect removal of the individual 15% cap and continued exposure to the aggregate 15% safeguard.
• Firms considering a strategy that would increase high-LTI lending above 15% should consider notifying the FCA or, for PRA-authorised firms, engaging with the PRA in accordance with the applicable supervisory arrangements before implementation.
• Firms should validate Product Sales Data submissions and establish quarterly controls for calculating individual high-LTI flows and reconciling them to the regulator’s published aggregate-flow data.
• Firms should maintain documented stress testing, affordability assessment, portfolio monitoring and governance demonstrating that high-LTI lending is managed prudently under the PRA supervisory statement.
• Firms should establish escalation and contingency procedures enabling rapid adjustment of high-LTI origination if the FCA issues temporary supplemental LTI guidance.
• Compliance teams may wish to review whether product, broker and customer communications accurately explain that the reform concerns portfolio flow limits and does not create an entitlement for an individual borrower to obtain a mortgage above 4.5 times income.
• Firms should monitor further FCA temporary supplemental guidance and PRA quarterly publications, as the market-wide mechanism can result in firm-specific reduction expectations even where the firm’s own lending remains commercially appropriate.

What changed

FG26/11 applies the FPC recommendation to firms with permission to enter into regulated mortgage contracts as lender, subject to specified exclusions. High-LTI lending remains lending at an LTI of 4.5 or above, and the aggregate high-LTI flow remains subject to the FPC’s 15% limit; however, the previous expectation that each in-scope firm must not exceed 15% has been removed. Firms that exceed the applicable de minimis threshold should monitor their own high-LTI flow, monitor the aggregate market flow, notify the FCA if changing their lending strategy to increase high-LTI lending above 15%, and maintain the capability to reduce lending if temporary supplemental LTI guidance is issued. The FCA and PRA will calculate and publish the aggregate flow quarterly using FCA Product Sales Data. The

Who is affected

• PRA-authorised banks and building societies that lend under regulated mortgage contracts
• FCA-authorised mortgage lenders with permission to enter into regulated mortgage contracts as lender
• Mortgage lenders whose in-scope lending exceeds the £150 million or 300-contract de minimis threshold in each of two consecutive four-quarter periods
• Mortgage lenders using high-LTI lending as part of their risk appetite, pricing, product governance or distribution strategy

Related regulations

• Financial Policy Committee recommendation on loan-to-income ratios in mortgage lending
• PRA Rulebook high loan-to-income lending requirements
• FCA Product Sales Data reporting requirements
• PRA Supervisory Statement on high loan-to-income lending
• FCA FG26/11 general guidance