Mortgage affordability: how lenders decide what you can borrow

What mortgage affordability means

Mortgage affordability is a lender's judgement of how much it can lend while satisfied that you can keep up the payments. Lenders apply two tests: a cap on the loan as a multiple of income, and an assessment, required by the Financial Conduct Authority, of income against spending, debts and higher interest rates. The lower result sets the limit.

That is why two people on the same salary can be offered very different amounts. The multiple is the ceiling, and the assessment decides how close to it you get.

For a number of your own, the how much you could borrow calculator works through both tests with your figures. It is an illustration, not advice; each lender applies the rules in its own way.

How many times your salary can you borrow?

Lenders express their ceiling as a loan-to-income (LTI) ratio: the loan divided by your annual income, or your joint income if you are buying together.

MoneyHelper, the government-backed guidance service, says the maximum is typically capped at around four and a half times annual income, and that most people are offered less. Some lenders go higher for some borrowers, and the rules on that changed in October 2026, as the next section explains.

The table shows what three multiples produce. These are sums, not offers: income times a multiple, with no assessment applied.

The loan-to-income rules as they stand in November 2026

The 4.5 figure is not a legal maximum on any one mortgage. It comes from a limit on the mortgage market that the Bank of England's Financial Policy Committee recommended in 2014, and that the regulators put into their rules and guidance that year.

What the limit is

Under the Prudential Regulation Authority's rules, a high LTI loan is one of 4.5 times income or more, measured on one borrower's income or on joint income. The Financial Policy Committee's limit is that no more than 15% of the number of new mortgages should be at that level.

What changed on 28 October 2026

Until 2025, the 15% limit applied to each lender in scope separately. From July 2025, after a new recommendation from the Financial Policy Committee, a lender could ask the regulators for an interim waiver from its own 15% cap while the rule was reviewed. On 14 October 2026 the Prudential Regulation Authority and the FCA published their final policy (PRA PS19/26 and FCA guidance FG26/11), which took effect on 28 October 2026:

• The firm-by-firm 15% cap has been removed. A lender can now do more than 15% of its new lending at 4.5 times income or above.
• The regulators aim to keep high LTI lending across the market as a whole consistent with the 15% limit. The Prudential Regulation Authority has said it will publish the market-wide figure on its website each quarter.
• If the market-wide figure goes above the limit, the regulators may expect lenders that are above 15% to reduce their share gradually back towards it. That expectation is about a lender's future flow of mortgages.
• Smaller lenders remain outside the policy: those lending less than £150 million, or making fewer than 300 mortgages, in each of two consecutive four-quarter periods.
• The Prudential Regulation Authority's rules bind the lenders it authorises and their mortgage-lending subsidiaries; the FCA's guidance covers other FCA-authorised lenders.

What it means for you

Some lenders now have more room to lend at higher multiples, and each decides how to use it. High LTI lending remains a minority of the market by design, and lenders set their own conditions on it. Nothing in the change relaxes the affordability assessment described next: a higher multiple is only available if the payments still pass it.

The mortgage affordability assessment lenders must carry out

The FCA's rules on responsible lending are in its mortgage rulebook, at MCOB 11.6. Before entering into a mortgage, a lender must assess whether you will be able to pay the sums due, and must be able to show that it did.

When it makes that assessment, the lender:

• Must take full account of your income, net of income tax and National Insurance.
• Must take full account, as a minimum, of your committed expenditure and your household's basic essential expenditure and basic quality-of-living costs.
• Must obtain evidence of the income you declare, and must not accept self-certification.
• Must not rely on a general declaration from you that you can afford it.
• Must not base the assessment on the equity in the home, or on an expected rise in house prices.
• Must take account of the impact of likely future interest rate rises.
• Must take into account changes to your income and spending that it knows about or should reasonably expect, such as retirement during the term.

The assessment is on a repayment basis, capital and interest together, unless the loan is an interest-only mortgage that meets separate rules.

What counts as income

The rules do not list which income counts. They require each lender to have a written policy setting out the types of income it accepts, the proportion of each it will count and the evidence it wants. Policies differ, which is one reason lenders reach different answers for the same person. The FCA's guidance says income can come from sources other than employment, such as pensions or investments, or from more than one job, and that the evidence needed depends on how you earn it.

The table describes common lender practice, not a rule.

How much of any variable income is counted is the lender's decision. If your income is not a plain salary, the guide to the self-employed mortgage goes further, and a qualified, regulated mortgage adviser can tell you which lenders' policies fit the way you are paid.

Outgoings and debts: what reduces the figure

The FCA's rules sort your spending into three groups, and the lender must count all three.

For committed spending, the lender must take reasonable steps to find your actual outstanding commitments, for example through a credit reference agency search. For living costs it may use your actual spending, or statistical figures for a household like yours, including dependent children.

Two points follow from this:

• Debts cut the loan directly. A monthly loan or car finance payment comes straight off the income available for the mortgage.
• A commitment that ends soon may be left out. The FCA's guidance tells lenders to take a common sense view of commitments due to end shortly after the mortgage starts.

Stress testing: could you cope if rates rise?

A lender does not only test the payment at the rate you start on. Under MCOB 11.6.18, it must consider likely future interest rates over at least the first five years of the mortgage.

The rule as it stands in November 2026:

• The lender must have regard to market expectations, and to any Financial Policy Committee recommendation on stress tests. The FCA says the committee's previous recommendation was withdrawn in August 2022 and that none applies now.
• Even where market expectations point to rates falling, or rising by less, the lender must assume a rise of at least 1 percentage point over the five years.
• The rule does not require this where the rate is fixed for five years or more, or for the whole term if that is shorter.
• The rule does not name the rate to test at. The FCA's guidance is that a lender should not use its own forecast.

On 7 March 2025 the FCA published a statement reminding lenders that they have flexibility in how they design the test. In December 2025, after its Mortgage Rule Review discussion paper, it said it had concluded that no further policy change to the stress test was currently required. Each lender still sets its own stressed rate, so the same income can pass at one lender and fail at another.

To see how a higher rate would change your own monthly payment, use the mortgage calculator. Lenders' current published rates are on the mortgage rates comparison, and the guide to the types of mortgage explains fixed and variable rates.

Joint applications

On a joint application, mortgage affordability is worked out for the household: the lender adds both incomes together, and the LTI ratio is measured on the joint figure. It also counts both people's commitments, so one applicant's loans and credit cards reduce what the two of you can borrow. Lenders typically search each applicant's credit file. What they look for there is set out in the guide to the credit score for a mortgage.

Where a guarantor supports the mortgage, the FCA's rules treat the guarantor as part of the affordability assessment too; see the guide to the guarantor mortgage.

First-time buyers

First-time buyers are assessed under the same rules as everyone else. The differences are practical:

• The deposit is often smaller. That means a higher loan-to-value, typically a narrower choice of mortgages and often a higher rate, which in turn raises the payment the lender tests. The guide to loan-to-value explains the bands.
• A record of paying rent does not replace the assessment. The lender must still assess your income, spending and debts for itself.
• Some lenders offer higher multiples to first-time buyers on their own conditions, and the October 2026 change gives lenders more room to do so.

On 9 June 2026 the FCA published a consultation, CP26/18, on rule changes meant to help first-time buyers and other underserved borrowers. Its proposals cover interest-only and part interest-only mortgages, retirement interest-only mortgages, variable and irregular income, credit-impaired borrowers, foreign currency loans and bridging loans. The consultation closed on 28 July 2026, and the FCA said it aimed to publish a policy statement in the second half of 2026. When this guide was checked on 10 November 2026, the FCA had not published one, so these remain proposals and this guide describes the rules in force.

Published rates for first-time buyers are on the first-time buyer mortgage rates page, the schemes pages cover help with deposits, and the guide to first-time buyer mortgages brings it together.

Mortgage affordability on a new-build home

The same rules apply, with three things to watch.

• Service charge, ground rent and estate charges. The FCA's list of basic essential expenditure includes ground rent and service charge on a leasehold home. On a new-build flat these can be a large monthly cost, and they come off the income available for the mortgage. The builder can give you the figures before you reserve.
• Incentives. The UK Finance Disclosure Form, which the builder completes for every new-build sale, sets out the incentives and goes to the lender's solicitor and the valuer. Lenders decide how to treat them. The incentives guide explains how.
• Lenders' new-build rules. Some lenders ask for a bigger deposit on a new-build flat than on a house, whatever your income supports. The guide to new-build mortgages covers this.

Being realistic about what you can borrow

Mortgage affordability is the lender's test, not yours. The maximum it will offer and the amount you are comfortable repaying are different numbers.

A lender's figure leaves out several things:

1. Costs the lender does not see, which only your own budget captures.
2. The payment over the whole term and at a higher rate, not only at the opening rate.
3. The total interest: a longer term lowers the monthly payment but increases the interest paid overall.
4. The one-off costs of buying, which the cash you need calculator adds up.
5. Other lenders' answers: a mortgage in principle shows what one lender might lend, and it is an estimate.

The guide to how to get a mortgage takes you from there through the full application to the offer.