The PRA has recently published a consultation paper on the amendments to its rules on loan to income ratios in mortgage lending. As part of the UK’s implementation of the Mortgage Credit Directive, the consultation paper sets out the PRA’s proposed amendments to the Housing Part of the PRA Rulebook.  From the 21 March 2016, second and subsequent charge mortgage contracts will fall within the definition of a regulated mortgage contract.

At present, the PRA’s rules place a loan to income flow limit on regulated mortgage contracts. This consultation paper proposes to amend these rules so as to exclude second and subsequent charge mortgage contracts from the loan to income limit. The PRA intends to consult on whether these loans should be included within the loan to income flow limit when loan level data becomes available during the course of 2017.  In the meantime, the PRA and the FCA will continue to work together to keep the market relating to second and subsequent charge mortgages under review.

Responses to this consultation are requested by Friday 11 March 2016.