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In its latest Financial Stability Report, the Bank said it was comfortable with banks and building societies issuing more mortgages at higher loan-to-income (LTI) ratios — a move that could modestly expand access to borrowing.

At present, just under 10% of new mortgages exceed 4.5 times a borrower’s income. The Bank has proposed allowing individual lenders to issue more than 15% of their new loans above that threshold, provided that across the industry as a whole, no more than 15% of new lending exceeds 4.5 times income.

What does this mean in practice?

Loan-to-income ratios determine how much someone can borrow relative to their earnings. For example, a person earning £40,000 would typically be limited to borrowing around £180,000 at a 4.5x multiple.

Allowing lenders greater flexibility may mean:

  • Some borrowers could access slightly larger mortgages
  • More first-time buyers may pass affordability checks
  • Households facing high rent costs may find entry to the market more achievable

The Bank estimates that the change could result in up to 36,000 additional higher loan-to-income mortgages per year.

However, this does not remove affordability assessments. Lenders will still be required to ensure borrowers can manage repayments, particularly if interest rates rise.

This article provides general information, not personal advice.

Why is the Bank supporting this now?

The recommendation follows calls from the UK government for regulators to consider ways of encouraging economic growth.

Nationwide, one of the UK’s largest mortgage lenders, welcomed the move. Chief executive Dame Debbie Crosbie said it would support housebuilding and help those struggling to get onto the property ladder due to high rents and living costs.

The broader goal appears to be balancing financial stability with economic expansion.

What about existing mortgage holders?

The Bank’s report also highlighted pressures facing current homeowners.

Around 3.6 million mortgages — approximately 41% of all outstanding home loans — are due for renewal over the next three years.

On average, those refinancing may see monthly payments rise by around £107, although this is lower than earlier estimates of £146.

Interest rate cuts since last August are beginning to feed through into mortgage pricing, and approximately 2.5 million households (28% of mortgage holders) are expected to see their payments fall over the next three years.

Global uncertainty still in the background

The Bank also warned of increasing global financial instability linked to geopolitical tensions and the US-led trade war.

Changes in currency markets — including weakness in the US dollar — were cited as shifts in the global financial system. While there has been limited direct impact on UK households so far, the broader economic environment remains uncertain.

What this means for first-time buyers

If you are considering buying your first home, these proposed changes may:

  • Improve borrowing flexibility in certain cases
  • Allow higher loan-to-income lending from some lenders
  • Increase the range of available options

However, deposit size, credit profile and overall affordability will still play a central role in approval decisions.

Higher borrowing levels also mean larger long-term commitments, so repayment sustainability remains important.

Exploring your options

If you want to understand how changes to loan-to-income rules might affect your borrowing potential, you can explore available mortgage options based on your income and circumstances.

(Exploring options provides information only and does not constitute financial advice or a recommendation.)