The first-time buyer mortgage rules that governed how much banks could lend have been rewritten, and for once the change runs in borrowers’ favour. Whether that is enough to make ownership genuinely achievable is a harder question.
What the First-Time Buyer Mortgage Rules Actually Changed
The framework dates to 2014, when the Financial Conduct Authority (FCA) enshrined a Financial Policy Committee recommendation that capped so-called high loan-to-income (LTI) lending. Under that original guidance, no more than 15% of a lender’s new mortgages could carry an LTI ratio of 4.5 or above. Crucially, the cap applied at firm level: each lender had to stay within its own 15% ceiling, regardless of what others were doing.
That firm-level constraint is what is now being dismantled. In July 2025, the Bank of England’s Financial Policy Committee recommended that the Prudential Regulation Authority (PRA) and FCA allow individual lenders to exceed their firm-level cap, provided the aggregate market-wide share of high-LTI lending stays at or below 15%. As an interim step, PRA-regulated firms were permitted to disapply the firm-level ceiling through a modification by consent, which ran until 30 June 2026.
The formal consultation followed. On 1 April 2026, the FCA and PRA published joint proposals to remove the firm-level 15% cap entirely while keeping the 15% aggregate limit intact. The practical effect is that a lender confident in its own credit standards can now pursue a higher-LTI strategy, so long as the system as a whole stays within bounds.
A second consultation followed on 9 June 2026, when the FCA published CP26/18, a broader mortgage rule review targeting first-time buyers and underserved consumers. The consultation closed on 28 July 2026; final rules are expected in the second half of 2026.
The market has already moved. According to data cited by Mortgage Introducer, the share of UK mortgage lending at 4.5 times income or above had reached 9.7% in Q1 2025, before the interim modifications even took full effect. Several lenders now offer 5.5 times income as standard, with 6.0 to 6.5 times available to specific borrower profiles, according to mortgage broker Fox Davidson.
‘The greater flexibility could mean that first-time buyers that felt ownership was still out of reach may find that the amount they can borrow has changed markedly in a relatively short time,’ says David Hollingworth, of mortgage broker L&C.
The Price Problem Has Not Gone Away
Higher multiples do not dissolve the underlying maths. According to the ONS Private Rent and House Prices bulletin for July 2026, the average UK house price was £271,000 in May 2026, up 2.7% on a year earlier. In England the figure was £292,000. The UK House Price Index for April 2026 put the average first-time buyer purchase price at £183,000, up 4.2% annually, but that national figure masks enormous regional variation.
The deposit burden tells the starker story. UK Finance data, also cited by Mortgage Introducer, found that a typical London first-time buyer borrowing below the 4.5 times threshold now needs a deposit exceeding 2.5 times their annual household income, up from 1.9 times before the LTI rules came into force. Bigger lending multiples ease the mortgage side of that equation. They do nothing for the deposit side.
Aaron Strutt, of broker Trinity Financial, acknowledges the pull. ‘It is tempting for many because it gives them the option to get out of renting or living with parents,’ he says. But the criteria remain strict: lenders typically want a clean credit history, a salaried income (self-employed applicants are frequently excluded), salary floors that vary by lender, and a willingness to fix for five or ten years rather than two. Low-deposit options have widened, but they add cost.
The risks are structural, not hypothetical. Circumstances change: jobs are lost, people take career breaks to care for family members, interest rates on renewal can differ sharply from today’s. ‘Ideally you need to have a cash buffer or a plan in case something happens financially,’ Strutt says. Lenders can also tighten criteria quickly if the economic outlook deteriorates.
My read is that regulators have made a sensible, if cautious, bet: let lenders compete on high-LTI lending rather than all huddling below the same firm-level cap. Whether that competition translates into genuinely affordable mortgages for people on ordinary incomes, or simply inflates prices further, depends on how house builders, planning authorities, and the broader economy respond. Final rules due in the second half of 2026 will tell us how far the FCA is willing to go. That is the number worth watching.
