Glossary · UK
What is Loan-to-Income (LTI) Ratio?
The size of a mortgage expressed as a multiple of the borrower's annual income, used by lenders and regulators to assess how much someone can responsibly borrow.
Full Definition
The Loan-to-Income (LTI) ratio, sometimes called an income multiple, expresses the size of a mortgage as a multiple of the borrower's gross annual income -- for example, a £250,000 mortgage on a £50,000 salary is an LTI of 5. Most UK mortgage lenders cap standard lending at around 4 to 4.5 times a single income, or a combined income for joint applicants, though some lenders offer higher multiples (up to 5 or 6 times income) for particular groups, such as professionals in certain occupations or higher earners, subject to passing an affordability assessment. At a market-wide level, the Bank of England's Financial Policy Committee also sets a macroprudential Loan-to-Income "flow limit," which restricts the proportion of new mortgage lending that any individual lender can advance at 4.5 times income or more, to guard against excessive household debt building up across the mortgage market as a whole. LTI is distinct from, but used alongside, the Loan-to-Value (LTV) ratio and a lender's own mortgage stress test: LTI looks at how much someone can plausibly repay based on income, while LTV looks at the deposit and equity in the property, and the stress test checks affordability if interest rates were to rise. A high LTI combined with a high LTV is generally the combination lenders scrutinise most closely, since it leaves the least room for a change in circumstances.