Bank of England Considers Raising Mortgage Income Threshold

The Bank of England is considering raising the threshold for high loan-to-income (LTI) mortgages from 4.5 times to five times household income. This potential policy shift by the Financial Policy Committee aims to improve access to home ownership as the United Kingdom housing market loses momentum. Nationwide reported that annual house price growth slowed to 0.5% in October.

Under current guidelines, the committee recommends that high-LTI lending remains below 15% of total new residential mortgages, with current lending at 14.1%. UK Finance estimates that increasing the threshold to five times income could expand lending capacity by 7% of annual new residential mortgage lending.

The Bank of England stated that it regularly reviews its housing-related policy tools to meet its objectives. This consideration follows changes to the mortgage framework implemented on October 28 by the Prudential Regulation Authority and the Financial Conduct Authority.