PRA loosens loan to income rules

Ryan Bembridge

February 27, 2017

The Prudential Regulation Authority has loosened its loan to income rules on high loan-to-value mortgages.

Previously lenders had to ensure no more than 15% of new mortgages were above a loan-to-income ratio of 4.5 every quarter.

But now lenders will only have to stay under the 15% mark over four quarters on a rolling basis, with the modification being designed to help firms deal with seasonal changes.

Fiddling while Rome burns

The PRA said in a statement: “The limit would still need to be complied with and monitored at the end of every quarter, but the relevant flows of loans for compliance with the limit would now be those during a rolling period of four quarters in total, instead of one quarter as currently applied.

“These four quarters refer to the immediate quarter under consideration and the three quarters preceding it.

“It is important to note that compliance under a fixed quarterly limit (which was the expectation before this change was introduced) automatically implies compliance with the limit under a four-quarter rolling basis.”

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