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Lloyds limits mortgage to four times your salary

Lloyds limits mortgage to four times your salary: Britain’s biggest lender caps loans over £500,000
Britain’s biggest mortgage lender announced a major clampdown on huge home loans yesterday.
The move from Lloyds comes amid fears that the market in the South-East is spiralling out of control – with London prices rising up to 21 times faster than those in other parts of the UK.
Lloyds Banking Group, which controls around a quarter of the country’s mortgage market, has now banned all loans of more than £500,000 with immediate effect – unless the mortgage offer is less than four times the household’s income.
The cap will apply to Lloyds subsidiaries Halifax, Bank of Scotland and Scottish Widows Bank as well.
Traditionally, couples were only ever allowed to borrow three or four times their joint salaries for a mortgage. However, in the years preceding the financial crisis of 2008, it was not uncommon for lenders to offer loans up to six times their wages.
The demand for mega-mortgages, driven by soaring house prices in London and the South, often resulted in buyers being offered mortgages they could barely afford.
The new rules from Lloyds mean borrowers will need a single or combined salary of £125,000 in order to take out a mortgage for £500,000. More than a quarter of homes in London now cost this much or more.
By the end of next year, the average home in the capital is expected to cost £560,000. A couple with a 10 per cent deposit of £56,000 would need a combined salary of £126,000 to secure a mortgage from Lloyds.
All lenders now use a complicated ‘affordability’ calculation to decide whether to offer a mortgage. Lloyds will continue to use these stress tests – but will also impose the salary cap for deals over half a million.


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