On October 1, the Prudential Regulation Authority (PRA) issued PS9/14 and the FCA published FG14/8 setting out their final policies on implementing the Financial Policy Committee’s (FPC) recommendation on loan to income (LTI) ratios in mortgage lending.

The policies were published after the FPC noted that acting against the excessive indebtedness caused by a high number of mortgages with high LTI ratios will make the financial system more stable.

The FPC made its recommendation on LTI ratios in June. The FPC recommended that the PRA and the FCA should ensure that mortgage lenders limit the proportion of mortgages at LTI multiples of 4.5 and above to no more than 15% of their new residential mortgages. The final policies of the PRA and FCA include permitting the application of the LTI limit to be at a group level rather than at the level of each regulated entity. PRA Policy Statement. FCA Finalized Guidance.