Islay Robinson explores the changing mortgage lending rules taking effect on 28 October 2026, explaining what greater flexibility for lenders could mean for borrowers, how affordability assessments remain important and why the upcoming Budget and interest rate decision could influence borrowing decisions.

The rules governing higher loan-to-income mortgages are changing on 28 October, giving individual lenders more flexibility to approve mortgages worth 4.5 times a borrower’s income or more. The change, confirmed by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) on 14 October, removes the 15% limit that previously applied to each lender individually. The wider market limit remains in place.

For borrowers, this could gradually create more choice. It does not mean every lender will offer larger mortgages, or that applicants will automatically qualify to borrow more. Each lender will continue to set its own criteria, assess affordability and manage the risks associated with its lending.

What Is Changing on 28 October?

Under the previous framework, lenders generally had to keep high loan-to-income mortgages within 15% of their new residential mortgage lending. A mortgage is classed as high loan-to-income when the amount borrowed is at least 4.5 times the borrower’s individual or joint income. Since July 2025, however, lenders have been able to apply to lend above their individual 15% limit under interim arrangements introduced while the regulators reviewed the policy.

From 28 October 2026, lenders will be able to exceed that individual 15% threshold without seeking prior permission, provided their approach is consistent with the regulators’ expectations and the wider market remains within the level recommended by the Financial Policy Committee (FPC).

The PRA’s policy statement explains that regulators will monitor high loan-to-income lending quarterly. If the overall level becomes inconsistent with the FPC’s 15% limit, lenders may be expected to reduce their share of this lending gradually.

I think this is a more flexible way of applying the rule. The purpose of the limit is to protect financial stability and reduce the risk associated with excessive household borrowing. However, applying the same cap to every lender restricted how much flexibility each could exercise, regardless of its business model or appetite for higher loan-to-income lending.

The new approach gives lenders greater discretion while retaining oversight of the market as a whole.

Which Borrowers Could Benefit?

The change could matter most to borrowers whose income does not fully reflect their wider financial position or future earning potential.

Business owners, for example, may have substantial assets but income that varies from year to year. Some professionals early in their careers may have strong earning prospects but have not yet built a long income history. Other borrowers may have considerable wealth but relatively modest declared income compared with the amount they want to borrow.

Under the previous framework, a lender approaching its individual limit had less room to offer higher loan-to-income mortgages, even where an applicant met its own lending criteria. Removing that restriction could allow lenders with an appetite for this type of business to consider more applications. Lenders already using the interim arrangements may see less practical change.

However, the change does not override affordability assessments or individual lending policies. Applicants will still need to demonstrate that the proposed borrowing is appropriate for their circumstances, and lenders will continue to assess income, expenditure, existing commitments and other relevant risks. Borrowing at a higher multiple of income also means repayments take up a larger share of income, leaving less room to absorb higher interest rates or a fall in earnings.

The practical difference will depend on which lenders choose to use the additional flexibility and how their criteria develop.

Why Income Is Not the Only Consideration for Larger Mortgages

For borrowers seeking mortgages of £1 million or more, the income multiple has never been the only consideration.

Private banks may assess the borrower’s wider financial position, including assets, liabilities, investment holdings, business interests and the proposed ownership and repayment structure. The approach varies by lender, and not every private bank assesses applications in the same way.

For an asset-rich borrower whose income alone does not tell the full story, understanding which lenders will consider the complete financial position can be particularly important. The new rules may give some lenders more room to support higher loan-to-income borrowing, but they do not guarantee that a private bank will approve a particular structure or lend a specific amount.

I would not assume the changes will immediately translate into higher borrowing limits across the market. Some lenders may adjust their approach, while others may choose to retain their existing criteria. The important question for an individual borrower is how a lender assesses their circumstances, rather than simply whether it has permission to lend above the former cap.

Will the Loan-to-Income Threshold Increase to Five Times Income?

During the consultation, several respondents argued that the 4.5-times-income threshold no longer reflected current market conditions and suggested increasing it to five times income.

That threshold has not changed. The regulators have referred feedback on the calibration of the threshold to the FPC for consideration in future reviews, alongside the FCA’s wider Mortgage Rule Review.

For borrowers, it is important to distinguish between the change taking effect on 28 October and any possible future revision to the threshold. The individual lender cap is being removed, but the definition of high loan-to-income lending remains at 4.5 times income.

I would not plan a property purchase around an assumed increase to five times income. Any future change would need to be confirmed, and lenders would still apply their own affordability and eligibility criteria.

Why the Timing Matters for Property Buyers

The new rules take effect on 28 October, the same day as the UK Budget. The Bank of England’s next interest rate decision is scheduled for 5 November, eight days later.

These events may influence different parts of the borrowing decision. The regulatory change affects how lenders can manage higher loan-to-income lending. The Budget could introduce measures relevant to property owners and buyers, while the Bank of England’s decision may affect expectations around interest rates and mortgage pricing.

None of these events guarantees a particular lending outcome or mortgage rate. Borrowers should also remember that lenders can change their products and criteria, and that any mortgage offer remains subject to its terms and conditions.

For someone planning a purchase, the sensible approach is to understand their borrowing position, establish which lenders may be suitable and consider how changes in rates, costs or lending criteria could affect affordability. Waiting for every announcement may not necessarily produce a better outcome, just as committing before understanding the available terms may create avoidable uncertainty.

Finding the Right Lender for Your Circumstances

At Enness, we work with a network of more than 1,000 lenders, helping clients explore financing options suited to their individual circumstances.

The value of that process is not simply finding a lender willing to offer a higher income multiple. It is understanding how different lenders assess income, assets, liabilities and the proposed transaction, then identifying which options may be appropriate.

The removal of the individual 15% cap creates more flexibility within the mortgage market, but it does not remove the need for careful assessment. Borrowers should focus on the lending criteria, overall costs and repayment commitments that apply to their own situation.

The regulators will continue monitoring high loan-to-income lending across the market. For borrowers, the change may broaden the options available over time, but the outcome will depend on how individual lenders respond.

Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

This article is for general information only and does not constitute personal financial or mortgage advice. Lending decisions, rates and terms are subject to individual circumstances and lender criteria. Borrowing more than you can comfortably afford may place your financial position under pressure. Enness does not provide tax, legal or investment advice. Regulatory information is correct as at 16 October 2026. Some forms of lending, including loans to companies and lending secured on property outside the UK, are not regulated by the Financial Conduct Authority.