We have published changes and clarifications to the general guidance we issued in October 2014 regarding the Financial Policy Committee's (FPC) recommendation on loan to income (LTI) ratios in mortgage lending.
We consulted on draft guidance in November 2016 in GC16/8 (PDF) and the consultation period closed on 10 January. Following a review of the implementation of the FPC's recommendation, the Prudential Regulation Authority (PRA) found that the design of the LTI flow limit (a fixed limit that no more that 15% of new mortgage contracts in a given quarter can have a LTI at or above 4.5 times) can affect firms' ability to manage their business pipeline.
Who this applies to
This guidance is relevant to mortgage lenders authorised by us. It is implemented with immediate effect, so that the LTI flow limit is applied on a four quarter rolling basis from the current quarter onwards. This means that starting from Q1 2017 we will monitor the LTI flow limit on a four-quarter rolling basis. For Q1 2017, this will also include data flows from Q2 2016 - Q4 2016. Our proposed changes and clarifications mirror those being made by the PRA.