June 26, 2014

At its June meeting, the Bank of England’s Financial Policy Committee, decided to recommend to the Prudential Regulatory Authority and Financial Conduct Authority, that they take steps to ensure that lenders constrain the proportion of new lending at loan-to-income ratios at or above 4.5 to no more than 15 percent of the total number of new mortgage loans. “This recommendation applies to all lenders which extend residential mortgage lending in excess of £100 million per annum. The recommendation should be implemented as soon as is practicable.”

 A consultation paper sets out the Prudential Regulation Authority’s proposed rules to implement the Financial Policy Committee’s recommendation. Attach the paper.

 This measure is currently not binding since no banks exceeds this limit and the average level of lending above a 4.5 loan-to-income ratio is only 10 percent.

 In addition, the Treasury announced that under the Help to Buy mortgage guarantee program, new loans could not exceed the 4.5 times borrower’s income cap. 

Link to Bank of England's Consultation Paper