Regulators publish LTI guidance

PRA and FCA have published a policy statement and finalised guidance respectively on loan to income (LTI) ratios in mortgage lending with immediate effect. In June 2014, the Financial Policy Committee issued a recommendation to PRA and FCA advising that they should “ensure that mortgage lenders do not extend more than 15% of their total number of new residential mortgages at loan to income ratios at or greater than 4.5”. Following a review of this, it was found that loan to income flow limits can affect firms’ ability to manage their business pipeline. In response, PRA and FCA have changed the design of the LTI flow limit from a quarterly limit to a four-quarter rolling limit. This means that starting from Q1 2017 PRA/FCA would monitor the LTI flow limit on a four-quarter rolling basis, which for Q1 2017 will be incorporating data on flows from Q2 2016 to Q1 2017.

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