At the end of May, partly-state-owned Lloyds Bank moved to cap loans over £500,000 with a 4 x income cap primarily targeting inflation in the London market.
RBS, which is 81% state-owned said Friday’s change of policy is being introduced primarily to address the inflationary pressures being seen in London and will be applied in addition to the standard affordability assessment.
The bank said: “NatWest Intermediary Solutions places a strong focus on affordability and already has measures in place to safeguard customers borrowing large amounts, for instance, reducing loan to values for larger loans.
“This measure adds to those safeguards and is targeted particularly at customers interested in the upper end of the London market, where there has been the most inflationary pressure.”
The new policy will also be introduced to mortgages from RBS Intermediary Partners on the same date and to RBS and NatWest mortgages available through the retail channels later this month.
The clampdown by the two state-backed lenders comes as the Bank of England is considering tightening controls on risky mortgage lending.
As house price growth in London and the South East hits 18% last month, figures confirm the majority-uptake of the Help to Buy scheme has been in the north. However, calls to rein in the Help to Buy 2 scheme from the European Commission and UK politicians continue to get louder.
Yesterday, Nationwide reported May house prices rose to the boom time-high hit in October 2007. UK house prices increased by 0.7% in May and were 11.1% higher than May 2013, in what was the 13th consecutive increase for the UK.
Jeremy Duncombe, director at Legal & General Mortgage Club said RBS’ decision to follow Lloyds in capping mortgage lending highlights lenders’ awareness of the potential risks facing the housing market at the moment.
“As house prices in the capital increase rapidly, it will be important that it is not allowed to grow out of control and capping the loan to income ratio is one way to do this.
As it stands, the UK has a two-speed housing market, with London and the South-East at risk of overheating, while other parts of the country are lagging behind, he said.
