PRA CP6/26 / FCA CP26/12: High Loan to Income Lending

Why It Matters

The shift gives banks greater pricing freedom and risk‑adjusted growth opportunities, but mandates transparent sector‑wide monitoring to curb systemic risk.

Key Takeaways

• FCA and PRA propose removing 15% high LTI cap
• Aggregate high‑LTI exposure must stay near 15% overall
• Quarterly public reporting of aggregate high‑LTI flow added
• Firms can align high‑LTI lending with risk appetite
• Comments due 1 July 2026; backstop 31 Dec 2026

Pulse Analysis

The high‑loan‑to‑income (LTI) metric has long been a barometer of mortgage‑lending risk in the UK. In July 2025 the Financial Policy Committee urged regulators to preserve an overall 15% ceiling on high‑LTI mortgages while allowing individual firms to deviate based on their risk appetite. This recommendation sparked a series of interim measures, including a modification by consent that let PRA‑regulated firms temporarily ignore the cap and an FCA guidance pathway for bespoke approvals. The new Consultation Paper builds on that groundwork, signalling a strategic pivot toward flexibility without abandoning macro‑prudential oversight.

Under the proposed rule changes, the 15% limit would be removed from firm‑level PRA rules and FCA guidance, granting lenders the latitude to pursue higher‑LTI products if their internal risk frameworks support it. To prevent a sector‑wide surge, the regulators will publish the aggregate high‑LTI flow each quarter, shifting from a rolling‑average calculation to fixed‑quarter reporting. This transparent data feed aims to give both supervisors and market participants a clear view of exposure trends, enabling timely corrective actions should the aggregate drift beyond the FPC’s target.

For banks and mortgage lenders, the consultation offers a chance to recalibrate product strategies, potentially unlocking higher yields from borrowers with stronger income profiles but limited equity. However, firms must balance this upside against heightened credit‑risk monitoring and capital planning, especially as the backstop date of 31 December 2026 approaches. Stakeholders are invited to comment by 1 July 2026, providing a narrow window to influence the final rulebook and shape the future of high‑LTI lending in the UK.