GC 16/8 : Amendment to Guidance on loan to income ratios in mortgage lending

In FG14/8, the FCA issued general guidance on its expectations for FCA-authorised mortgage lenders. This was to ensure that mortgage lenders limit the number of mortgage loans made at or greater than 4.5 times LTI to no more than 15% of their total number of new mortgage loans.

These proposed amendments are being made to reflect findings that the current fixed quarterly nature of the LTI flow limit could make it harder for some firms to manage their business pipeline. In light of this, the FCA has published a consultation paper regarding proposals to move to a four-quarter rolling limit. The consultation period ends on 10 January 2017.

This consultation also contains additional clarification on: 

  • the scope of the LTI flow limit regarding second charge mortgages – these remain excluded from the LTI ratio calculation;
  • interest roll-up bridging loans – are not currently covered by FCA guidance on the LTI flow limit and this continues to be the case, and
  • mortgages ported to another property where there is no increase in the principal outstanding – firms may exclude ported mortgages from their calculation of the share of loans with an LTI ratio at or above 4.5 relevant for the application of the LTI flow limit, so long as there is no change to the principal sum outstanding.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

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