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Lloyds to limit mortgage lending


Lloyds Banking Group has announced it will limit mortgage lending to four times an applicants income for mortgages worth more than £500,000.

They said the reason for the cap was a result of “specific inflationary pressures in the London housing market”.

House Prices in London have rocketed recently in comparison to the rest of the country, despite the average house in the UK already exhibiting an increase of 8% in value over the last year.

Speaking about the cap, Stephen Noakes, Group Director of Mortgages at Lloyds said: "Whilst the housing market outside of London is starting to improve, the recovery is fragile and prices largely remain below their peak. It is important we don't disrupt this recovery".

He continued by pointing out that whilst prices throughout the UK remain below their 2007 peak, house prices in London are now 30% above this peak. Noakes said: “This is largely driven by issues of supply which are particularly acute in London and this is having an impact on income multiples which are failing to keep pace with asset growth."

‘Help to Buy’ not a factor

Despite the Prime Minister claiming that he will consider changes to the Help to Buy scheme to avoid the housing market overheating, Mr Noakes felt this would be unnecessary.

He said that only 2% of London purchases were a result of the Help to Buy scheme and that pegging this back wouldn’t make a huge difference.

He continued by saying that he supported the scheme because it raised confidence in the housing market outside of London.

New lending controls

Mike Carney, the Governor of the Bank of England expressed his concern about the housing market overheating and the risk of high loan to value mortgages. Because of this, The Bank of England’s Financial Policy Committee could introduce new lending controls, possibly as early as next month.

Exactly what these controls could be have not yet been confirmed, however, speculators have suggested it could include forcing lenders to hold more capital on risky loans or subjecting borrowers to more stringent affordability tests.

The former Bank of England policy maker Kate Barker said: "What the bank is really concerned about is not a housing market bubble, it's irresponsible lending. They could ask lenders to hold more money against high risky lending and that would make it more expensive for lenders and it would mean less lending at, for example, high loan to income ratios."

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