The Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) have confirmed that the threshold for lighter mortgage regulation will increase from £100 million to £150 million from 11 July 2025.
Originally set in 2014, the threshold determines which lenders must comply with stricter affordability rules. The increase is expected to benefit around 80 lenders, giving more headroom for growth and potentially opening up additional lending opportunities.
Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said:
“This is a step in the right direction to give smaller lenders more scope to support borrowers, but for some it might not be as much relaxation as they were hoping. The changes have been carefully considered in line with ‘original risk appetite’.”
However, Springall also pointed out that the update does not include any change to the current loan-to-income (LTI) flow limit – something many in the industry were calling for.
“Just last month, the CEOs from Yorkshire Building Society, Nationwide Building Society and Skipton Building Society collectively called for the LTI limit to be raised to 20% from 15% to allow them to lend to more potential homeowners. This was sent as a letter to the Treasury Committee and reaffirmed the point that building societies are responsible for 35% of first-time buyer lending,” she added.
The LTI flow limit means lenders can issue no more than 15% of their new residential mortgage loans each year at an income multiple of 4.5 or more. Some have argued that this constraint limits support for first-time buyers, despite ongoing efforts by mutuals to develop flexible mortgage products.
