Royal Bank of Scotland and NatWest introduce mortgage caps


Mortgage caps

The banks are to limit income multiples when lending over £500,000.

The Royal Bank of Scotland (RBS) Group is the latest lender to introduce a cap on mortgage sizes.

Last month Lloyds Banking Group (which includes Lloyds and Halifax) announced that with immediate effect that it would apply a maximum income multiple of four times the annual salary of the applicant(s) when lending more than £500,000.

Now Royal Bank of Scotland and NatWest, both part of the RBS Group, have confirmed they will be implementing an identical cap.

They are also limiting the maximum term of a mortgage to 30 years.

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Why lenders are capping income multiples

A spokesman for RBS said: "We are focused on looking after the interests of our customers and ensuring that they only take on mortgage lending that they can afford."

The bank suggests the cap will affect 2.6% of its loans in London and 0.5% in the rest of the country.

And it's the English capital that is causing concern. As Lloyds pointed out when announcing its cap, house prices in London are now almost 30% above the levels of 2007, which is making income multiples tricky.
Even the European Commission wants to see the Government act on house prices.

There's no such issue across the rest of the UK, which is why these caps will have a tiny impact once you get outside of the M25. But only time will tell if they help to dampen the London housing bubble.

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The people who affect house prices

The people who affect house prices