The Loan to Income (LTI) flow limit is a technical recommendation made to the Financial Conduct Authority (FCA) by the Financial Policy Committee (FPC) of the Bank of England.
This recommendation sets a threshold for the maximum LTI ratio that lenders can use when approving new residential mortgages. Specifically, the LTI flow limit stipulates that no more than 15 percent of a lender’s new residential mortgages can have LTI ratios at or greater than 4.5 times the borrower’s income.
The LTI flow limit is designed to promote responsible lending practices and protect borrowers from taking on too much debt. By limiting the proportion of high LTI ratio mortgages that lenders can approve, the FCA and the FPC aim to ensure that borrowers are not taking on mortgage debt that they cannot afford to repay.
It’s important to note that the LTI flow limit is just one part of the overall responsible lending framework that mortgage lenders must follow. Lenders are also required to assess a borrower’s affordability using a range of factors, such as their income, expenses, and debt-to-income ratio.
The mortgage stress test used to be part of these assessments before it’s removal in 2022.
