Debt-to-Income Ratio UK: What Lenders Look For in 2025 | WIS Mortgages

Debt-to-Income Ratio for Mortgage: Understand, Calculate, and Improve Yours

Disclaimer: This guide is for informational purposes only and does not constitute personal financial advice. Mortgage criteria vary by lender, and approval depends on individual circumstances. Always consult an FCA-authorised mortgage adviser for regulated advice.

Introduction

When applying for a mortgage in the UK, lenders assess not just your income but also your existing debts. A key metric used is your debt-to-income (DTI) ratio. This ratio helps lenders determine how financially stretched you are and whether you can comfortably afford a mortgage.

What is Debt-to-Income Ratio?

The debt-to-income ratio measures the percentage of your gross monthly income used to repay debt. A lower ratio signals better financial health to lenders.

Formula:

DTI (%) = (Monthly Debt Payments ÷ Gross Monthly Income) x 100

Example:

• Gross income: £3,000/month
• Debt payments: £600/month
• DTI = (£600 ÷ £3,000) x 100 = 20%

Why DTI Matters for Mortgage Applications

Lenders use DTI as part of affordability checks, aligned with FCA MCOB 11.6 rules:

• Low DTI (under 36%): Indicates lower risk, often gives access to competitive mortgage rates.
• Moderate DTI (40-45%): Acceptable but may require closer assessment.
• High DTI (50%+): High risk; specialist advice is usually needed.

Typical UK Lender DTI Thresholds

What’s a “Good” DTI for Mortgage Purposes?

• Ideal: Under 36% – best chance for competitive rates
• Acceptable: 36–43% – common among approved applicants
• Caution: 43–50% – limited options, may require compensating factors
• High Risk: Over 50% – specialist advice recommended

How to Calculate Your DTI

1. List all monthly debt repayments (credit cards, car finance, personal loans, student loans).
2. Divide the total by your gross monthly income.
3. Multiply by 100 to get a percentage.

Example:

• Income: £3,500/month
• Debts:
  • Car loan: £200
  • Credit Card: £150
  • Student loan: £100
  • Total: £450
• DTI = (£450 ÷ £3,500) x 100 = 12.8%

What If Your DTI Is Too High?

• Pay off or consolidate existing debts
• Avoid new loans or credit applications
• Increase income via overtime or side income
• Consider a longer mortgage term (if affordable)
• Delay your application while improving financial stability

Common Mistakes Affecting DTI

• Ignoring small debts (even £30/month counts)
• Applying for new credit just before a mortgage
• Assuming rent payments reduce DTI (they don’t)

DTI vs Other Mortgage Affordability Factors

FAQs

What is the maximum DTI lenders allow?

Most lenders prefer under 43%, though some may allow up to 50% for high earners with low credit risk.

Does rent count towards my DTI?

No, but rent is assessed separately under affordability checks.

Can I get a mortgage with 50% DTI?

Yes, but usually through a specialist lender. Regulated advice is recommended.

How can I lower my DTI quickly?

Pay off credit cards, consolidate debts, and avoid new credit before applying.

Is the new mortgage payment included in DTI?

Yes – lenders include proposed mortgage repayments in your DTI calculation.

Conclusion

Your debt-to-income ratio is a key factor in mortgage affordability. Keeping DTI under 36% gives the best chance for competitive rates, while staying below 43% is acceptable for most mainstream lenders. If your DTI is high, take steps to reduce debt, increase income, or adjust your deposit strategy before applying.