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As part of the series of responses we are witnessing due to the MMR changes Lloyds Banking Group has refined its policy for new high LTV lending by introducing a mortgage lending cap. Lloyds also owns Halifax, Bank of Scotland and Scottish Widows Bank and is Britain’s biggest lender.
It now intends to apply an income multiple of 4 x income when customers are borrowing more than £500,000 effectively acting as a mortgage lending cap. This means four times single income when there is just one borrower, or, alternatively four times joint income when a couple is borrowing together. This is a new concept with a mortgage lending cap of £500,000 being introduced alongside the income multiple limit.
The group has said that the move was being made in response to an “issue largely in the upper tiers of the housing market”. They expect the policy to impact approximately 8% of their lending in London, where the average price of a property is now £459,000.
Although the press has publicised that these changes are likely to affect high earning individuals or couples with large disposable incomes it also has to be remembered that the other high street lenders and private banks are unlikely to follow suit.
Lloyds’ target policy changes are unlikely to put a pin into the London bubble yet some critics have suggested that they may add to the “rich-poor divide” by favouring cash buyers.
Islay Robinson, CEO of Enness Private Clients comments – “In this climate even those buyers know that it makes more sense to borrow than to not. So, concerning the question of what this means for HNW clients wishing to borrow – it probably means that they will offer their business to private banks. Enness is aware of a lot of new lenders entering the marketplace so there will be more favourable rates on offer in this competitive space”.