Bank of England introduces temporary exemption to the 15% loan-to-income limit

The Bank of England introduced a temporary exemption to its loan-to-income limit in July 2025, allowing individual lenders to exceed the 15% cap on loans above 4.5 times a borrower's income, provided the industry as a whole stayed within it¹. The rule dates from 2014, when the Bank imposed a limit stating that loans at more than 4.5 times income could not exceed 15% of each lender's new mortgages¹. The Bank is currently consulting on making the change permanent¹.

Under the updated rules, individual lenders may exceed the 15% limit while the overall cap remains in place across the wider market². Which? reports that this has led major lenders including Barclays, Nationwide and NatWest to allow some borrowers to take out a home loan of up to six times their annual salary². Broadly, most lenders will allow borrowing of between 3.5 and 5 times annual earnings, with an increasing number offering between 5 and 6 times².

The change sits alongside other shifts in affordability testing. In March 2025 the Financial Conduct Authority reminded firms about existing flexibility in interest rate stress tests, leading many lenders to widen borrowing options and increasing offers by around £30,000 for many borrowers¹.

Nationwide has stated that making the exemption permanent would allow it to lend an additional 10,000 first-time buyer mortgages and around £2.5bn of additional lending per year¹. The Bank of England has not been reported as setting out a date for a decision on permanence.

"In July 2025 the BoE introduced a temporary exemption to this rule, saying individual lenders could exceed the 15% limit as long as the industry as a whole did not."

House of Lords Library, source¹

Why it matters for households

The limit governs how many mortgages a lender can write above 4.5 times a borrower's income, so the exemption changes what individual lenders can offer rather than removing the market-wide cap. Borrowers affected are those whose income multiple sits above 4.5 times earnings, including some first-time buyers. The change took effect in July 2025 and is temporary while the Bank consults on making it permanent¹.

Affordability remains stretched. The average house price in England was 7.63 times average earnings in 2025, down from a peak of 9.06 in 2021 but still above the five times earnings benchmark used by the Office for National Statistics; in London the ratio is 10.6, while in the North East an average-priced home is five times average earnings¹. The mean deposit of a first-time buyer in 2024/25 was £78,131 and the median was £36,500, with 86% of first-time buyers saying they used savings and 31% reporting help from family or friends¹.

Higher multiples also mean larger repayments relative to income. The House of Lords Library notes that high loan-to-value mortgages leave borrowers more exposed to default if rates rise and to negative equity if prices fall¹. Lenders may prioritise larger loans for certain professions, larger deposits of 25% or more, or household incomes above £100,000². See our guide to how much you can borrow for a mortgage and to professional and key worker home loans.