Bank of England Weighs Rule Change That Could Open Up Larger Mortgages

The Bank of England is considering another change to mortgage lending rules that could give banks more room to offer larger loans. For buyers whose income supports a substantial mortgage but whose options are limited, it could widen the choice of lenders willing to help.

The Financial Times reported on 31 October that the Bank’s Financial Policy Committee is looking at moving the threshold for high loan-to-income mortgages from 4.5 to five times income.

For a household earning £180,000, those multiples translate into £810,000 and £900,000. A £90,000 difference can change the homes a family can consider, the amount of savings it needs to commit, or whether a planned move works at all.

The change has not been agreed. But it comes just days after a separate reform gave individual lenders greater freedom over higher-income-multiple mortgages. Together, the developments point to a market in which access to larger loans is receiving renewed attention.

A small change in the rule can make a large difference to buyers

The current system puts mortgages at or above 4.5 times income into a category known as high loan-to-income, or high LTI. Policy aims to keep these loans within 15% of relevant new mortgages across the market.

Moving the dividing line to five times would mean loans between 4.5 and five times income no longer count towards that market-wide share. That could give lenders more room to take on customers seeking larger mortgages.

Consider a couple with £180,000 of combined annual income who want to borrow £855,000. Their mortgage would be 4.75 times income, placing it in the high-LTI category today.

Under a five-times threshold, the same loan would sit below the dividing line. Their earnings, deposit and monthly repayments would be unchanged. What would change is how the mortgage fits into the lender’s wider lending plans.

That distinction explains the appeal of the proposal. It could make a familiar type of application easier for lenders to accommodate, potentially giving buyers more places to turn when one bank cannot offer the amount they need.

Mortgages above 4.5 times income are already available. Willow’s earlier coverage of expanding borrowing options for higher earners explored that shift. This latest development could broaden access further, depending on the Bank’s decision and lenders’ response.

Larger income multiples are already gaining ground

The Bank’s figures published on 14 October show the high-LTI share rising from 9.7% in Q3 2025 to 14.1% in Q2 2026.

Source: Bank of England. Shares are measured by number of mortgages within the policy’s scope, rather than by the value of all mortgage lending.

The increase brings the market closer to the 15% limit and helps explain why the definition matters. More buyers are already borrowing at higher multiples, so the amount of room available for that business is becoming more relevant to lenders.

The Bank says regulators have not currently asked firms to reduce their high-LTI lending. The figures do, however, give the discussion a practical backdrop: this is a part of the mortgage market that is already being used more heavily.

For higher earners, the significance can be considerable. Even half a multiple of income represents a substantial sum when two professional salaries are supporting the purchase.

Lenders have already been given more freedom this week

The change implemented on 28 October removed the 15% cap that applied to individual lenders, while keeping the market-wide limit.

That allows a bank with an appetite for higher-LTI lending to do more of it, provided the overall market remains consistent with the policy. Another lender can concentrate on borrowers seeking smaller loans relative to their earnings.

The reported five-times proposal would go a step further by changing which mortgages are included in the high-LTI total in the first place.

For buyers, these changes could work together. One gives lenders greater freedom to specialise; the other could create more space for loans that currently sit above the 4.5-times threshold.

The commercial opportunity is greater choice. A borrower seeking a substantial mortgage may benefit if more lenders can compete for the case, rather than finding that an otherwise suitable bank has little appetite for that level of borrowing.

Where the difference could be felt first

Higher-earning couples buying in expensive areas are an obvious example. They may have saved a substantial deposit and built strong careers, yet still find a gap between their mortgage budget and the cost of the home they need.

That gap can become especially frustrating for home movers. They may have considerable equity in their current property, but still need a larger loan to buy an extra bedroom, move closer to work or remain near their children’s school.

Using the £180,000 household example, a £900,000 mortgage against a £1.2m purchase would require £300,000 towards the price. At £810,000 of borrowing, the cash contribution would be £390,000. Both figures exclude purchase costs.

The extra borrowing could therefore support the same purchase with less cash tied up in the property. For another buyer, it could extend the search to homes previously outside the budget.

Those are different uses of additional borrowing, with different consequences for the household. The first preserves more savings; the second increases purchasing power. Both bring a larger repayment commitment.

A wider choice of lenders could also matter to applicants who have already received an unhelpful answer from their usual bank. One lender’s decision does not necessarily describe the options available across the market.

Business owners need their income understood as well as a higher multiple

For company directors and professionals with variable earnings, the mortgage conversation often starts one step earlier: how much income will the bank recognise?

A household receiving £180,000 through salaries, dividends and bonuses can look quite different to a lender from one receiving the same amount through two fixed salaries. The total may be similar, but the evidence behind it is different.

Suppose a lender uses £160,000 of that household’s earnings in its borrowing calculation. Five times that amount produces £800,000. A lender able to use the full £180,000 would reach £810,000 even at 4.5 times income.

This simple example shows why the right treatment of income can matter as much as a change in the headline multiple. A more generous multiplication does little if too much of the income is left out.

For a director, the important questions may concern the relationship between salary, dividends and the company’s performance. For an employee, they may concern whether a bonus is regular, how much varies and the history available to demonstrate it.

That is where a broader lending market could be particularly useful. More capacity among lenders that understand these income patterns could give applicants better options. The proposed rule change alone would not alter how a bank assesses business profits or variable pay.

A bigger mortgage still has to work after moving day

The attraction of an extra £90,000 is obvious when a buyer is trying to close a gap in the purchase budget. Its effect continues long after the keys have been handed over.

The household has to service the larger balance alongside its other commitments. Childcare, school fees, existing loans and plans to reduce working hours can make two households with identical earnings comfortable with very different mortgage amounts.

Term also matters. Spreading repayments over longer can reduce the monthly figure, while leaving the borrower paying interest for more years. A lower monthly payment therefore needs to be considered alongside the total cost.

Lenders will continue to assess affordability. The FCA’s guidance on mortgage stress testing explains how future interest-rate changes are considered where that rule applies.

For buyers, the useful outcome is a mortgage that makes the move possible and leaves enough room for life afterwards. The highest available advance will not always be the most suitable amount to borrow.

The next development to watch is what banks offer buyers

The reported proposal is significant because it addresses a constraint on the supply of larger mortgages. Its value to borrowers will become clearer through a formal decision, an implementation date and changes in lenders’ actual offers.

A lender might accept more customers under its existing criteria. It might widen access to a higher multiple or focus on particular borrowers. Those responses would determine who benefits and by how much.

For anyone planning a move now, there is already a reason to look beyond an assumed 4.5-times ceiling. Higher-multiple lending exists today, and a previous borrowing estimate may deserve another look if income, deposit or circumstances have changed.

Willow can establish which lenders are suited to the income involved and the amount required. If the Bank goes ahead, that review can then be revisited against the new lending options as they emerge.