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.
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.
