The Royal Bank of Scotland (RBS) have introduced tighter restrictions on mortgage lending in an effort to make sure customers can afford their loans.
Well that’s the official line anyway, although personally I think there may be hidden agenda…. RBS, which owns NatWest, will restrict customers to borrowing four times their income on loans of £500,000 or more.
At Mortgage Required, most of our business is done in Berkshire and Surrey, two of the most expensive counties to buy property in the UK, yet the average mortgage we arrange is about £190,000. That’s a long way short of the £500,000 threshold.
Only about 2.5% of borrowers have mortgages over this amount and the majority of these loans are for property in London. Last year prices in the capital rose by 17%, so restricting how much you can borrow to 4x your salary may address inflationary pressure in London.
The Lloyds Banking Group who include Halifax, Birmingham Midshires and one or two other smaller brands announced similar measures last month.
I suppose this all makes sense in the world of mortgages, but few attempts to influence house prices in the past have worked. It’s all about supply and demand and in most desirable areas, demand is high and supply very limited.
That’s said, although the high street lenders are making these moves, there are still plenty of private banks happy to get involved in higher lending with “high net worth” clients by offering “individual underwriting” for special cases. These banks often persuade clients to move their banking and / or investments to the new bank in exchange for special underwriting on the mortgage.
I can’t help but think that RBS and Lloyds will simply start to miss out on this lucrative sector of the market and other smaller banks will pick up the slack.
One thing I can’ get my head round is this: Were I earning £500,000 per annum, would I be happy with a mortgage of just 4x my salary at £2,000,000 m? Or would I want to stretch myself further? At what point would the level of my mortgage keep me awake at night? Thankfully not a problem for me right now. Night night!
For more information, speak to a mortgage adviser on 01628 507477 or contact us.
Recent posts
There was a 32% increase last year in 100% loan-to-value (LTV) mortgages which are mortgages that require zero deposit. According to a recent report by chartered accountants and business advisers, Lubbock Fine, the reason behind this is buyers simply struggling to save enough for a deposit.
Average savings by age in the UK
2 days ago
Many people are quite private when it comes to what is in their bank account. In this short blog, we look into what Brits have saved by age group.
Research from buy-to-let lender, Landbay, shows that UK landlords are looking at raising rents ahead of the Renters' Rights Bill which is due to come into force this year.
Data shows landlords could miss out on green mortgages due to expired energy performance certificates.
Buying a house is a big deal, and where you are planning to buy will make a difference financially. In this short blog, we look at the most affordable and most expensive areas and how much you need to be earning to buy in there.
Pros and Cons of Equity Release
20 May 2025
Equity release is a type of mortgage that allows homeowners 55 and over to access money from their property's equity without having to leave their home. This is done by securing a loan against the house which is usually repaid by selling the property when the borrower passes away or has to move into long-term care.
Your House Viewing Checklist
19 May 2025
It’s important to ask questions about the property you are interested in before taking that step to make an offer. A little probing can make all the difference between buying your dream house or something that requires a lot of work.
Half of over 60s predicted to benefit from accessing housing wealth through Equity Release
16 May 2025
There are millions of homeowners over the age of 60 who are likely to release money from their homes to pay for their lifestyle during retirement giving those who are 'asset rich but cash poor' a way to live out their retirement the way they wish.
More information
Trusted by
