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RBS and Lloyds reduce London mortgage lending amid bubble fears
Britain’s two state-backed banks have retreated from lending to the London property market since the financial crisis, in a sign of caution amid fears of an inflating housing bubble.
Lloyds Banking Group has more than halved its share of London lending – from 31% to 16% – since 2008, according to figures obtained by the Financial Times.
Royal Bank of Scotland has also reduced its exposure to the capital, although less dramatically.
London mortgages accounted for 13% of RBS’s lending in 2013, compared with almost 16% in 2008, when values were substantially lower.
After several months of booming house price growth in London, concerns are mounting that borrowers are overstretching their finances to afford homes.
Nevertheless, a number of lenders are still piling into the market. Mortgage brokers said three banks – Woolwich, a subsidiary of Barclays; Santander UK; and Clydesdale – had been the most active in London in recent months.
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Lloyds is expected to further retrench from the London market after it tightened lending criteria on large loans last week.
In a move that the bank said was aimed at addressing “specific inflationary pressures in the London housing market”, Lloyds restricted customers seeking loans of more than £500,000 to a maximum of four times income.
RBS is considering imposing stricter limits on loan-to-income multiples, according to people familiar with its plans, while other banks are also expected to take a more cautious stance.
The Bank of England has signalled that it might tighten controls on risky mortgage lending as soon as next month.