The Financial Policy Committee's recommendation on loan to income ratios in mortgage lending: general guidance

Finalised Guidance
Financial Conduct Authority Page 1 of 7 1 Finalised Guidance FG26/11 THE FINANCIAL POLICY COMMITTEE’S RECOMMENDATION ON LOAN TO INCOME RATIOS IN MORTGAGE LENDING:
GENERAL GUIDANCE
A. Application and interpretation
Status of guidance

1. This is general guidance given under section 139A(1) of the Financial Services
   and Markets Act 2000.
2. The implementation of the Financial Policy Committee’s (FPC) new
   recommendation on loan to income ratios continues to advance the FCA’s market integrity objective as it continues to lead to macroeconomic stability by reducing the chance of an unsustainable credit boom, which in turn leads to a more sound, stable and resilient financial system. Doing so is also compatible with the FCA’s strategic objective to ensure that the relevant markets function well.
3. This guidance sets out the FCA’s expectations to implement the FPC’s high LTI
   (Loan to Income) recommendation published on 9 July 2025. The FPC made 1 FG26/11 The Financial Policy Committee’s recommendation on loan to income ratios in mortgage lending: General Guidance October 2026

Financial Conduct Authority Page 2 of 7 the recommendation that the PRA and FCA amend implementation of its LTI flow limit to allow individual lenders to increase their share of lending at high LTIs while aiming to ensure the aggregate flow remained consistent with the limit of 15%.
4. The guidance initially issued on 1 October 2014 (FG14/8) and revised on 27
February 2017 (FG17/2) and 11 July 2025 (FG25/4) is revoked and replaced by this guidance. Application
5. This guidance applies to a firm with Part 4A permission that includes entering
into a regulated mortgage contract as lender, except if it is:
(1) a bank;
(2) a building society;
(3) a subsidiary undertaking of a bank or building society with Part 4A permission that includes entering into a regulated mortgage contract as lender; (4) an insurer; (5) a friendly society; or (6) a credit union.
6. This guidance applies to an overseas firm only in relation to activities carried
on from an establishment in the United Kingdom.
Exclusions
7. The following are excluded from the expectation on high loan to income
lending set out in this guidance:
(1) further advances;
(2) lifetime mortgages;
(3) regulated mortgage contracts that are not a first charge legal mortgage; (4) re-mortgages with no change to the principal sum outstanding; and (5) retirement interest-only mortgages. Interpretation
8. Interpretative provisions (including definitions in the Glossary) of the
Handbook apply to this guidance in the same way they apply to the Handbook, except where a definition is otherwise provided in paragraph 10 that definition applies for the purpose of this guidance.
9. Where an expression in italics is not defined in the Glossary, it has the
meaning given in paragraph 10.
Glossary of terms defined in this guidance
10. For the purpose of this guidance, the following definitions apply:

Financial Conduct Authority Page 3 of 7 aggregate flow the market aggregate high LTI flow figure as calculated by the PRA and FCA, and published by the PRA on its website each quarter. credit the cash loan provided by a firm under a regulated mortgage contract:
(a) at the time the regulated mortgage contract is entered into; or (b) drawn down at a later date. de minimis threshold entering into, during both of the two most recent consecutive sets of four quarters:
(a) regulated mortgage contracts under which the total credit provided was less than £150 million; or (b) fewer than 300 regulated mortgage contracts. further advance a further loan to an existing borrower of the firm and which is secured on the same property, whether under a new regulated mortgage contract, or by variation to an existing regulated mortgage contract. high LTI flow the percentage share of new regulated mortgage contracts within scope of this guidance that constitutes high LTI lending in a given set of four consecutive quarters. high LTI lending the high LTI mortgage contracts which a firm enters into. high LTI limit provisions Paragraphs 17 to 23 of this guidance. high LTI mortgage contract a regulated mortgage contract under which the credit provided by a firm to an individual, or individuals jointly, is at, or exceeds, the LTI ratio. income the gross annual income, before tax and other deductions, of an individual taken into account by a firm to calculate the credit it will provide under a regulated mortgage contract.

Financial Conduct Authority Page 4 of 7 legal mortgage includes a legal charge, and in Scotland, a heritable security. LTI Loan to income. LTI ratio a multiple of 4.5 times an individual’s income or individuals’ joint income, at the time at which that income is assessed by a firm for the purpose of entering into a regulated mortgage contract with the individual or individuals. quarter any of the four calendar quarters of each calendar year. regulated mortgage lending the regulated mortgage contracts which a firm enters into. re-mortgage with no change to the principal sum outstanding a regulated mortgage contract in respect of which the following conditions are met:
(a) the amount of credit provided under the regulated mortgage contract does not exceed that outstanding to:
(i) the firm; or
(ii) a different lender, under a previous regulated mortgage contract, or any other type of contract under which the obligation to repay the credit provided is secured by a legal mortgage on land; and (b) in determining the amount of credit provided, no account is taken of:
(i) arrangement fees;
(ii) professional fees and costs; and
(iii) administration costs.
B. Guidance to firms
The de minimis threshold
11. Firms should determine (on an ongoing basis) whether their regulated
mortgage lending levels exceed the de minimis threshold.
12. In this guidance, two consecutive sets of four quarters is computed as
follows:
a) a new set of four quarters starts at the beginning of each new quarter; and b) the four quarters in each set run consecutively.

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13. The high LTI limit provisions apply to firms whose regulated mortgage lending
levels exceed the de minimis threshold.
14. Where a firm exceeds the de minimis threshold, the high LTI limit provisions
apply from the start of the second quarter following the end of the final quarter relevant to the determination that the firm exceeds the de minimis threshold.
15. Once applicable, the high LTI limit provisions will cease to apply if the firm’s
regulated mortgage lending levels fall below the de minimis threshold. The firm should then continue to monitor regulated mortgage lending levels in accordance with paragraphs 11 and 13.
16. Where more than one firm within a group exceeds the de minimis threshold,
references to ‘a firm’ in the high LTI limit provisions should be interpreted as applying to the group. Only firms above the de minimis threshold would contribute to the high LTI flow calculation of the group. High LTI limit provisions
17. Firms should not operate on the basis that they can permanently maintain a
high LTI flow of more than 15%. Firms should act in accordance with and have regard to the FCA’s expectations set out in this guidance. Temporary supplemental LTI guidance may also be issued by the FCA.
18. A firm should:
a) notify the FCA if it intends to change its lending strategy in order to increase its high LTI flow above 15%; b) monitor its own high LTI flow; c) monitor the aggregate flow; d) monitor for the publication of FCA temporary supplemental LTI guidance; and e) ensure:
i. it is able to make adjustments to reduce its high LTI flow if the
FCA issues temporary supplemental LTI guidance; and
ii. its governing body approves and has effective oversight of the
firm’s strategy for ensuring compliance with subparagraph (i).
19. If, at any point, the FCA and PRA judge that:
a) the aggregate flow is at a level inconsistent with the FPC’s 15% limit; and b) adjustments are necessary in order to ensure the aggregate flow becomes consistent with the FPC’s 15% limit; then the FCA will set out (via temporary supplemental LTI guidance) how it expects firms with a current high LTI flow above 15% to gradually reduce their high LTI lending.

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20. The rate at which firms are expected to reduce their high LTI flow by will be
expressed as a fraction, to be applied to the amount their individual high LTI flow exceeded 15% in the data available prior to announcement. The fractional reduction will be calculated at the point of announcement and will apply for each successive future quarter, until such time the FCA considers no further adjustment is necessary. The expected adjustment each quarter is based on the reduced excess above 15% expected in the previous quarter, so the percentage size of each adjustment decreases over time. In determining the fractional rate of adjustment, consideration will be given to the latest available data, supervisory intelligence and any known external market factors. For example, the announcement may communicate:
The PRA and FCA expect that any firm, or group where applicable, that has most recently measured high LTI flow in excess of 15% on a four-quarter basis should take action to reduce its future high LTI flow, initially measured at the end of [a given quarter], by [e.g. one fifth] of the amount its most recent measure exceeds 15% and again by [e.g. one fifth] in each consecutive quarter until its flow measure is equal to or less than 15%, or these expectations are amended or withdrawn, whichever occurs sooner.
21. A firm subject to FCA temporary supplemental LTI guidance should take the
necessary steps to reduce their individual future high LTI flow in accordance with that guidance. This adjustment expectation applies only to future lending decisions; firms will not be expected to withdraw existing approved mortgage offers.
22. While temporary supplemental LTI guidance has effect, firms with a current
high LTI flow at or below 15% are expected not to increase their flow above 15%.
23. When the FCA and PRA consider that the aggregate flow has returned to
being consistent with the 15% limit, the FCA will set out that firms are no longer expected to make adjustments and withdraw the temporary supplemental LTI guidance.
C. Calculation and publication of aggregate flow
24. The PRA and FCA will calculate the aggregate flow which the PRA will publish
on its website each quarter.
25. This aggregate flow figure will be calculated using the FCA’s Product Sales
Data (PSD). The PSD reporting periods are the four calendar quarters of each year beginning on 1 January. The aggregate flow figure will be calculated on a quarterly basis and updated on the webpage within a reasonable time following the submission of the data.
26. The calculation of the aggregate flow will be based on regulated mortgage
contracts (subject to the exclusions set out at paragraph 7) originated by firms above the de minimis threshold.
27. If the reported data is revised and there is a material change to the aggregate
flow, the PRA will update the figure. The FCA will consider whether any changes are required as a result of the revision and, if so, update any temporary supplemental LTI guidance.

Financial Conduct Authority Page 7 of 7 D. Monitoring
28. The FCA will use product sales data returns to monitor which firms exceed the
de minimis threshold.
29. The FCA will use product sales data to monitor the aggregate flow and
individual firm high LTI flows, and this will form part of considerations for supervisory engagement.
30. The FCA will monitor a firm’s compliance with the expectations set out in this
guidance and any temporary supplemental LTI guidance.
31. Where a firm is subject to, but has not acted in accordance with the
expectations set out in this guidance and/or any temporary supplemental LTI guidance, the FCA may consider using its supervisory powers. It could, for example, exercise its powers under section 55L of the Act to require a firm to cease entering into high LTI mortgage contracts.