CP6/25 – Proposed amendments to PRA Rulebook and FCA Guidance on the de minimis threshold for the Loan to Income flow limit in mortgage lending

Overview

In this consultation paper (CP)6/25 – Proposed amendments to PRA Rulebook and FCA Guidance on the de minimis threshold for the Loan to Income flow limit in mortgage lending, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) (collectively ‘the regulators’) – are consulting to increase the de minimis threshold above which the Loan to Income (LTI) flow limit is applied, following the Financial Policy Committee’s (FPC) recommendation in November 2024.

The LTI flow limit ensures that mortgage lenders 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.

Currently the de minimis threshold exempts from the LTI flow limit lenders that extend residential mortgages^{footnote [1]} of less than £100 million in value per annum.

Summary of the proposal

This CP sets out a proposal to increase the LTI flow limit de minimis threshold from £100 million per annum to £150 million per annum.

The change would address inadvertent regulatory tightening by increasing the value of residential mortgage lending that small lenders can extend before becoming subject to the LTI flow limit, thereby contributing to the regulators` secondary objectives on competition, and therefore competitiveness and growth.

The PRA proposes to implement the recommendation by amending the Housing Part of the PRA Rulebook. The FCA proposes to implement the recommendation by amending its general guidance initially issued in October 2014 (FG14/8) and revised in February 2017 (FG17/2).

The FCA is required to consult when changing general guidance. The PRA has a statutory duty to consult when changing rules, section 138J of Financial Services and Markets Act (FSMA) 2000.

Responses and next steps

This consultation closes on 8 May 2025. Please send any comments on the proposed LTI de minimis threshold using the online form on the FCA’s website or in writing.

The FCA is accepting responses on behalf of both the FCA and the PRA. Both authorities will consider the responses received and resolve any issues raised.

Following this, the FCA will issue revised Final Guidance, and the PRA will publish a policy statement so that their respective guidance and final rules can be in place by 2025 H2.

CP6/25 – Proposed amendments to PRA Rulebook and FCA Guidance on the de minimis threshold for the Loan to Income flow limit in mortgage lending