When securing a mortgage, one of the key considerations for lenders is the Loan-to-Income (LTI) ratio. This metric helps both lenders and borrowers assess how much can be borrowed based on the applicant’s income, ensuring that repayments remain affordable over time.

The LTI ratio is particularly important in today’s mortgage market, where lenders are balancing borrower affordability against wider regulatory oversight and economic trends.

What is LTI?

Loan-to-Income (LTI) is a multiple applied to a borrower’s gross annual income (before tax) to calculate the maximum mortgage a lender might offer. Traditionally, LTI multiples ranged from 4 to 5 times income. 

However, in today’s market, 5 to 5.5 times income is increasingly common, and some lenders now offer up to 7 times income in specific circumstances, such as for higher earners or with longer fixed-rate products.

For example, if a borrower earns £50,000 a year and the lender applies an LTI of 4.5, the maximum potential loan would be £225,000.

Income assessments typically include salary and consistent bonuses, with additional sources like rental income or commissions sometimes considered. Irregular income, such as ad hoc overtime, is less commonly included unless it is stable and provable.

How LTI Levels Are Set

Lenders apply the LTI multiple to determine the maximum amount they’re willing to lend. The multiple offered will depend on a combination of factors, including:

• The borrower’s income stability and type
• Credit profile and existing financial commitments
• Size of deposit or equity
• Length of the mortgage term
• Type of mortgage product selected (e.g. fixed vs variable)

For instance, some lenders may offer higher LTI ratios for borrowers taking out longer-term fixed mortgages (e.g. 10 or 15 years), as these provide greater predictability in repayments.

Lenders will also assess affordability using broader stress-testing measures, considering monthly outgoings and whether the borrower could afford repayments under higher interest rate scenarios.

Regulatory Limits on High LTI Lending

Although higher LTIs are available, lenders must operate within strict regulatory boundaries. The Bank of England’s Financial Policy Committee (FPC) currently restricts the volume of lending at or above 4.5× income to no more than 15% of new residential mortgages each year.

This cap ensures responsible lending and helps prevent widespread borrowing beyond means, especially in times of economic pressure or housing market volatility.

In 2025, the FPC is reviewing a proposal to raise the exemption threshold for smaller lenders from £100 million to £150 million of annual mortgage lending, but the core 15% high-LTI flow limit remains in place across the sector.

LTI and Mortgage Affordability

Your LTI ratio can significantly influence how much you can borrow and, ultimately, the type of property you can afford. Here's how income levels relate to typical mortgage sizes when an LTI of 4.5 is applied:

• £225,000 mortgage: Requires a gross annual income of £50,000
• £500,000 mortgage: Requires an income of around £111,111
• £750,000 mortgage: Requires an income of approximately £166,667

In each scenario, the LTI helps determine the maximum loan, but lenders will also factor in monthly financial commitments, lifestyle costs, and whether the borrower’s income is expected to continue at the same level, especially over long mortgage terms.

It’s also worth noting that 35‑ and 40‑year mortgage terms are becoming more common, which can increase affordability in monthly repayment terms but may affect long-term cost and eligibility depending on the borrower’s age and retirement plans.

Changing LTI Policies and Economic Conditions

Lenders may adjust their LTI policies based on:

• Interest rate movements
• Inflation and cost of living trends
• The broader economic outlook
• Regulatory guidance

During periods of uncertainty, such as interest rate hikes or reduced household spending power, lenders may reduce the availability of high-LTI products. Conversely, in more stable or competitive markets, borrowers may find a wider choice of mortgages at higher multiples.

The Financial Conduct Authority (FCA) is currently exploring ways to support home ownership by easing some responsible lending rules, but this is being weighed carefully against financial stability concerns raised by the Bank of England.

Advice from a Local Broker

Saneesha McNairn, our Mortgage Broker in North London commented:

“It’s important to understand how the Loan-to-Income (LTI) ratio directly affects your borrowing capacity. By assessing your income and applying the appropriate LTI multiple, we can determine how much you may be eligible to borrow, helping you make informed decisions about the type of property you can afford. It’s always worth considering how factors like your deposit, existing debts, and the current economic environment can impact the amount a lender is willing to offer.”

In Summary

The Loan-to-Income ratio is a key factor in determining mortgage eligibility. While many lenders continue to offer 4 to 5× income, ratios of up to 5.5× or even 7× are now possible under specific conditions, particularly for borrowers with higher incomes or long-term fixed products.

However, regulatory limits still apply, and a lender’s decision will always consider a full affordability assessment, not just income alone. Understanding how your income, debts, deposit, and personal circumstances affect your LTI eligibility is vital when planning to buy a home.

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Source: 
https://www.introducertoday.co.uk/breaking-news/2025/04/lender-offering-seven-times-income-is-responsible-initiative/
https://www.bankofengland.co.uk/financial-policy-committee-record/2025/july-2025

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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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Disclaimer: This article is for informational purposes only and does not constitute financial advice. Mortgage eligibility is subject to status and lending criteria. Always speak with a qualified mortgage adviser to understand the most suitable options for your personal circumstances.

Thomas Oliver UK LLP is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.

Approved by The Openwork Partnership on 20/08/2025.