With immediate effect where the mortgage lending on a property in the UK is over £500,000, the group will now additionally assess the mortgage application by applying an income multiple limit of four.
This was a targeted policy decision primarily designed to address specific inflationary pressures in the London housing market. We all know that London operates in its own sphere and has many factors which impact it.
As a result, whilst the housing market outside of London is starting to improve, the recovery remains fragile in many other areas and as prices largely remain below their peak it is important we don’t disrupt this recovery.
We are not seeing evidence of a house price bubble across the UK and Help to Buy is not one of the factors driving London house prices. Just 2% of purchases in London in 2014 have been through the scheme with the significant majority of applications coming from outside the South East.
London is the only region where house prices are significantly above the 2007 peak – they were 29% above as at February 2014. Outside of London, all regions except South East and East are still between 90-100% of the 2007 house price peak. London follows a countrywide trend that higher value properties are leading house price growth.
There is a greater volume of high value (£1m+) properties in London. This is largely driven by issues of supply which are of particular concern in London and the linked problem that income is failing to keep pace with this.
Mike Jones director of intermediaries at Lloyds Banking Group
