This week has seen one of the biggest shakeups for potential homeowners and mortgage experts in a generation, as one of the single biggest regulatory barriers to homeownership might be going away very soon.

The Bank of England’s Prudential Regulation Authority (PRA) has announced that it is reviewing the current rules surrounding Loan-to-Income (LTI), and some lenders can apply to get rid of the current rules entirely.

Sometimes known as the affordability ratio or the “4.5x rule”, the current loan-to-income regulations have limited the overwhelming majority of mortgages offered by lenders to less than 4.5 times the annual income of the borrower. Only 15 per cent of all mortgages they offer can break this limit.

This rule has come under significant scrutiny in recent years due to the spike in house prices starting in 2020, a surge that, despite rapidly changing circumstances, has led to stubbornly stable house prices.

The rule was initially implemented as part of a raft of measures in the wake of the global financial crisis, intended to stop people from ending up with unaffordable and unsustainable mortgages.

The problem is that house prices have risen at a much higher rate than wages, meaning that to get a mortgage for a house at the current Rightmove average asking price (£378,240), a household has to be earning £84,000.

This is more than twice the current median average pre-tax salary and locks a huge number of people out of property ownership.

Whilst the announcement is framed as a review, and a more permanent set of rules will likely come following its conclusion, borrowers can often benefit now, as many lenders can apply immediately to offer higher LTI mortgages to people.

As well as this, the mortgage guarantee scheme has been made permanent, allowing for some buyers to get a mortgage with just a five per cent deposit, and lending criteria rules have also changed to allow rent payments to be used as proof that someone can pay a mortgage.

All of this has opened the door not only for people who were previously denied a mortgage on affordability grounds to get onto the property ladder, but it also enables people to get more favourable rates and more options on the market.