Due to the soaring house prices in London Lloyds is imposing a mortgage cap on properties over £500,000 to 4 times borrower’s salary. It seems the main driver for this move was the announcement from the Bank of England goveneor Mark Carney that some borrowers were currently leaveraged at 5 times their current salary. As house prices continue to soar in some cases upto 30% above the housing peak in 2007 there is major concern of future problems.
Of course London is a completely different market to the rest of the country with it’s average house price around £460k and the driving force for these relatively high values is the lack of supply of property in the capital where there is a need to build 300,000 houses per year, but the current rate is only around 130,000.
What are your thoughts on this cap and the current market?