Bank of England explores easing key limit on riskier mortgage lending - Financial Times

The Bank of England is exploring an easing of a key regulatory limit on riskier mortgage lending, according to the Financial Times. The rule in question is the loan-to-income cap, which restricts how much banks can lend relative to a borrower's income. Under current rules, no more than 15% of a lender's new mortgage lending can sit above 4.5 times a borrower's income—a measure introduced by the Financial Policy Committee to guard against a build-up of household debt.

Any relaxation would be significant for the UK housing market and for banks, since it could widen the pool of eligible borrowers and support mortgage volumes. For lenders, however, looser limits also raise questions about credit risk and capital planning, and the regulator's framing will matter: a consultation is not a change in rule.

What to watch is whether the Bank publishes formal proposals and how it balances its financial-stability mandate against housing-market concerns. Investors should also note that any adjustment would likely be gradual, with safeguards retained to prevent a sharp rise in high-debt lending.