How Much Can I Borrow? UK Mortgage Affordability Explained
Published 8th September 2026
Almost everyone starts with the same shortcut: four and a half times income. It is a useful first estimate and it is not how the decision is actually made. A UK lender runs two separate tests, and the smaller of the two answers is the one you get.
The first is a cap on the loan as a multiple of income. The second is an affordability assessment that works from what actually lands in your account and what is already committed out of it. Which one binds depends on your household, and knowing which one is holding you back tells you what to fix.
Test One: The Loan to Income Limit
The Financial Policy Committee treats lending at 4.5 times income or above as "high loan to income", and limits how much of it the mortgage market as a whole can do. That limit is 15% of new residential mortgage lending.
Two things follow, and both are widely misunderstood.
It is not a legal maximum on your own borrowing. Plenty of loans are written above 4.5 times, they just have to fit inside the allowance. Lenders often reserve that headroom for higher earners, professionals on defined career paths, or borrowers with large deposits.
And it has never been the constraint most people think it is. High LTI lending was running at under 10% of new lending in 2025, well below the 15% ceiling, so the system had room. The FPC recalibrated the mechanism in mid-2025 so that individual lenders could exceed 15% of their own new lending while the market-wide figure stayed consistent with 15%, and a consultation ran during 2026 on removing the individual limit from the rules entirely. As of now that consultation has closed without a final policy statement.
Test Two: The Affordability Assessment
This is the one that actually decides most applications. The FCA's rules require a lender to assess whether you can afford the mortgage on a capital and interest basis over the full term, working from your net income after tax and National Insurance, and deducting:
- Committed expenditure: credit commitments and other contractual obligations that will continue after completion. Loans, car finance, credit card minimums, student loan repayments, maintenance payments.
- Basic essential expenditure: food, utilities, council tax, insurance, transport, essential travel. Lenders use national statistical figures for this rather than asking you.
- Basic quality of living costs: the non-essential spending it would be unreasonable to expect a household to eliminate.
What is left is what the lender will let you put towards a mortgage payment. Then it applies the stress test.
The Stress Test
Lenders cannot assess you on the rate you are actually being offered. The rules require them to assume interest rates rise by at least one percentage point over the first five years, regardless of what markets expect rates to do. Most apply a larger margin than the minimum.
The FCA looked at this again during 2025, and its conclusion was that no change to the rule was needed. What it did do was clarify that firms have more flexibility than they had been using: a lender can reference market rate forecasts rather than mechanically adding a margin to its own reversion rate, and the regulator noted that reversion-rate-plus-margin can restrict access unnecessarily when rates are falling.
A Worked Example
The Household
- Two incomes: £38,000 and £29,000, so £67,000 combined
- Roughly £4,600 a month between them after tax and National Insurance
- Car finance £450 a month, with three years left to run
- One Plan 2 student loan, on the £38,000 income
- Credit card minimum payment £40 a month
The income multiple test gives 4.5 × £67,000, so £301,500.
Now the affordability side. The Plan 2 repayment threshold is £29,385, so the higher earner repays 9% of £8,615, which is £775 a year or about £65 a month. The lower income is under the threshold and repays nothing. Committed expenditure is therefore £450 plus £65 plus £40, giving £555.
| No children | Two children in nursery | |
|---|---|---|
| Net monthly income | £4,600 | £4,600 |
| Committed expenditure | −£555 | −£555 |
| Childcare | £0 | −£1,100 |
| Essential and quality of living costs | −£1,450 | −£1,450 |
| Available for the mortgage | £2,595 | £1,495 |
| Loan that supports at a 5.8% stress rate, 25 years | About £410,000 | About £236,000 |
| Loan to income cap | £301,500 | £301,500 |
| Offer | £301,500 | About £236,000 |
Same salaries, same debts, and a £65,000 difference in what they can borrow. For the first household the income multiple is the binding constraint and there is nothing to be done about it short of earning more. For the second, affordability binds, and every pound of committed spending they can clear before applying moves the number.
The essential and quality of living figures above are illustrative. Lenders derive theirs from national statistics and they differ, which is one of the reasons two lenders can produce offers £40,000 apart on identical facts.
What Actually Moves the Number
| Change | Effect on borrowing |
|---|---|
| Clearing £450 a month of car finance | Large. Roughly £70,000 at the stress rates above |
| Paying off a credit card you never use | Small but free, if the minimum payment is being counted |
| Extending the term from 25 to 35 years | Meaningful, at the cost of far more interest overall |
| A pay rise | Direct, and it lifts the income multiple cap too |
| A larger deposit | Does not change affordability, but reduces the loan you need and improves the rate |
| Adding a second applicant | Usually the biggest single lever, if their commitments are modest |
How Income Is Counted
Basic salary is straightforward. Everything else is a judgement, and the judgement varies by lender:
- Bonus, overtime and commission: commonly counted at between 50% and 100%, and usually only if it is regular and evidenced over a period.
- Self-employed: typically two or three years of accounts or tax calculations, averaged, or sometimes the most recent year if lower. A single bad year can be very expensive.
- Contractors: some lenders work from the day rate rather than accounts, which can be far more generous.
- Benefits and pension income: often counted in full or in part, depending on the type and how long it will continue.
- Rental income: treated separately again, and remember the new property income tax rates arriving in April 2027 will change what a landlord keeps from it.
What Changed in July 2025
The FCA made a set of rule changes that took effect on 22 July 2025 and that are worth knowing about because they are permissive: lenders may use them, but nobody is obliged to.
- A full affordability assessment is no longer required simply to reduce your mortgage term, which had previously discouraged people from shortening a term when they could afford to.
- The modified affordability assessment was extended to remortgaging with a new lender, where the new deal is more affordable than the current mortgage or than what the existing lender offers. This matters most to people who were effectively stuck with their lender.
- Speaking to a lender no longer automatically triggers a full advice process, which makes execution-only switching simpler for people who know what they want.
Interest Only Is Not a Route Round Affordability
An interest-only mortgage has a lower monthly payment, but the rules require the lender to have evidence of a clearly understood and credible strategy for repaying the capital. Speculative strategies must not be accepted, and the rules specifically name two: hoping the property will rise enough in value to repay the loan on sale, and relying on an expected but uncertain inheritance. If those are the plan, the answer is no.
The Cap Is Not a Target
A maximum offer is what a lender is prepared to risk, calculated on your circumstances today. It says nothing about whether the payment leaves you room to replace a boiler, take a pay cut, or have a child.
Work out the payment you would be comfortable with first, then find the loan that produces it. Our mortgage calculator will show you the monthly cost at different balances, rates and terms, and it is worth running the stressed rate through it as well as the one you have been quoted.