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Tuesday, August 19, 2014

Lloyds limiting mortgage support for many London property buyers

Lloyds bank in the news
Lloyds bank has existed for nearly 2.5 centuries
By Andrew Reilly

When it comes to getting on to the property ladder, or moving up it, is hard, especially in London. This is why it is important to obtain as much help and assistance as possible but it seems as though one major bank company is looking to limit the amount of help and support that they can provide.

On the one hand, this is perfectly understandable and if the banking industry took a bit more responsibility for their actions, the economy may not have suffered so much. However, there is no doubt that in areas like London where the value of property is continually rising, the limits being placed by the Lloyds Banking Group may squeeze some people out of the property market.

The company has recently announced that for all loans worth more than £500,000 they will limit the mortgage lending amount to a level that is four times a person’s income. This move has been taken by the company in line with the “specific inflationary pressures” that can be seen in the London property market. There is no doubt that the London property market stands apart from the rest of the country and it is important to evaluate it on its own merits and standings. The role of organisations like the Lloyds Banking Group will have a huge impact on the people who are looking for a new property in London in the months and years to come.

The company made the announcement after two key issues. Firstly, figures were released which indicated that house prices rising at an average rate of 8% a year and the figures in London were even larger than this. The other factor that made the company act was the Governor from the Bank of England issuing a statement about the risks which were associated with high loans for mortgages.

The firm is trying to balance the needs of potential property buyers outside of London while protecting themselves and the market in London. There are two very distinct regions with London, and the South-East of England, operating in one way and the rest of the country operating at a lower level. The firm pointed out that the house prices in London are standing at a level which is 30% higher than the peak that was obtained in 2007. While there are many reasons for this surge in demand, the basic economic principle of supply not keeping up with the level of demand has seen the prices of property surge to high levels. The firm has stated they expect this new cap to affect close to 8% of all the lending they would likely carry out in London.

The firm states only a limited number of London property buyers will be affected

On the surface, this doesn’t seem too bad if the firm believes that 92% of the business they carry out is likely to be unaffected. However, it should be considered that it is this 8% that will need the most support in finding the right London property and this means that people will be greatly affected by this change in stance. There will be debates and discussions about the rights and wrongs of this decision but there is no getting away from the fact that this is another decision that will negatively impact on the ability of some people to find a suitable property.

Lloyds has stated that the new cap is not going to apply to people who are looking to renew their mortgage, so this will be of some comfort and benefit to people. This means that people who will be affected include people looking to take out extra levels of borrowing and people who are looking to remortgage in order to be able to afford to move or upgrade their property. This new stance will apply to customers who are looking to obtain lending from Scottish Widows Bank, Bank of Scotland, Lloyds Bank and Halifax.

While this move is only being taken by the Lloyds Banking Group at the moment, there is every chance that this move will be replicated by other companies in the banking industry. It is rare for a banking institution to make a bold move that stands in opposition to activities undertaken by the rest of the industry so there is every chance that other firms will act in a similar manner. This will place a greater level of pressure on potential property buyers across the English capital.

About the author: Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 8 years but has been writing for as long as he can care to remember. When Andrew isn't sat behind a laptop or researching a story, he will be found watching a gig or a game of football.

Image: Tim Green; "Lloyds Bank"  CC BY 2.0


  1. There is a full range of mortgages for first time buyers and home movers in UK. All customers have to do is to choose the lender who suits your needs. On the web there are direct lenders to trust. You can use online services as an important consideration to cover you transportation costs, expenditures for dealers, brokers, lawyers and consultants etc. This financial service provides timely assistance whenever you experience lack of cash for any big purchase or enterprise.

    1. Hm, are you offering a payday loan for buying a house (according to the link posted)? Seriously? Seems like you are a very responsible lender if you are offering people to take a small loan (how many 100's of quick loans you need to take to be able to buy a house) for a short period with terribly high interest rate?

  2. Getting a mortgage loan in UK has never been to easy, sepcially taking into account the cost of property in London. The fact that Lloyds tried to minimize the risk by making the loan less available will lead to people taking instant loans online or use other services even with higher interest rate. On the other hand this might lead to new loan providers which is good for the borrower.

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