There’s some positive news for first-time buyers trying to get on the property ladder. The Bank of England has recently updated its mortgage lending policy, giving lenders a little more flexibility when offering higher loan-to-income (LTI) mortgages. 

These changes are designed to make mortgage options more accessible, particularly for those stepping into home ownership for the first time, while continuing to ensure that lending remains responsible and sustainable.

These updates were confirmed in the Bank of England’s official Policy Statement PS11/25, published in July 2025, following careful consultation with the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).

What Is a High Loan-to-Income (LTI) Mortgage?

A loan-to-income mortgage compares the size of the mortgage to your annual income. For example, if you earn £30,000 per year and borrow £135,000, your LTI ratio is 4.5. Anything at or above this level is considered a high LTI mortgage.

Since 2014, most lenders have been limited in how many of these higher LTI mortgages they can offer. The idea is to strike a balance between helping people buy homes while also avoiding over-stretching borrowers financially.

At the moment, lenders must keep high LTI lending to no more than 15% of their new residential mortgages.

What’s Changing and Why?

The change announced by the Bank of England increases the threshold that determines whether a lender needs to stick to the 15% rule. Previously, any lender offering over £100 million a year in mortgages had to follow the cap. 

Now, that threshold has risen to £150 million. This means that smaller lenders, many of whom focus on local communities, will have more room to support borrowers with high LTI mortgages.

The Bank of England has made this move because the mortgage market has grown over the years, and they believe this change will give smaller firms more freedom to help buyers, without increasing financial risks.

What Does It Mean for the Mortgage Market?

The Bank’s July 2025 Financial Stability Report notes that high LTI mortgages made up about 9.7% of new lending in early 2025. That figure could rise to around 11% by the end of the year, still well within the 15% sector cap. So, while this is a shift, it’s not a dramatic one, and it's designed to keep the mortgage market competitive and fair for all.

This extra flexibility may be particularly welcome to first-time buyers who have strong incomes but are finding it tough to save large deposits or borrow enough under previous lending limits.

A Sensible Step for Borrowers

For those hoping to buy their first home, this change might mean more mortgage options become available. But it’s still important to approach borrowing carefully. While lenders will assess affordability and run the usual stress tests, taking out a high LTI mortgage means larger monthly payments and a longer-term financial commitment.

It’s always worth taking the time to fully understand what this might mean for your personal circumstances; your income, lifestyle, goals, and ability to cope with changes like rising interest rates.

What This Means for Lenders

The updated policy allows smaller mortgage providers, who often specialise in personalised customer service and local knowledge, to support more borrowers. This could help increase competition and offer buyers more choice. 

Larger lenders, who are still subject to the 15% limit, will also be able to use more of their available high LTI capacity, depending on how the market shifts over time.

Why Speaking to a Mortgage Adviser Can Really Help

With more mortgage products likely to enter the market and the complexity that sometimes comes with high LTI borrowing, this is a perfect time to speak to a qualified mortgage adviser.

Daniel Chapman, Mortgage Adviser at Thomas Oliver in Camborne, Cornwall, said: 

“These changes could make a real difference to first-time buyers. But while having more choice is a good thing, it’s so important to get mortgage advice that’s tailored to your own situation. As mortgage advisers, we help you understand your borrowing limits, work out what’s affordable, and find the product that really fits, not just for now, but for your future too.”

At Thomas Oliver, we take the time to get to know you, your goals, and your budget before recommending any mortgage options. That way, we can support you in making informed and confident mortgage decisions.

If you're thinking about buying your first home or simply want to understand how these new rules might affect you, our friendly team is here to help. Speaking with a professional mortgage adviser can be one of the most reassuring steps you take towards your next chapter.

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Important Information: This article is for general information only and does not constitute personal mortgage advice. Your home may be repossessed if you do not keep up repayments on your mortgage.

Approved By The Openwork Partnership 09/09/2025.

Sources: bankofengland.co.uk, handbook.fca.org.uk, fca.org.uk