UK Banks Possibly Raising Cost of House Mortgage
The cooling off period of the UK housing market has begun and how long it will last is anyone’s best guess. Many things are being blamed for the slowdown. One of the likely things is the new lending rules which are being applied in banks throughout the UK. Banks are now limited by the amount of funds it has on hand in relation to the amount of mortgaged funds it dispenses to the public. The new lending rules have been put in place in an effort to prevent the housing market from reaching a crisis level similar to 2007.
These new lending rules which have been administered from the Bank of England are causing some UK banks to consider raising rates for house buyers.
Lloyds Bank is not one of the banks considering the raising of rates, but others are not so fortunate. Nationwide Building Society, Barclays and Co-op are three such lenders who are looking at the possibility of having to raise rates on mortgage applications.
The current lending rules state banks are not able to lend more than 33 times their core capital. That figure will reduce to 25 times their core capital with new rules in place.
Horta-Osorio with Lloyds Bank commented on the new ratios, saying: “It is clear the 3 per cent ratio will increase. We have prepared our strategy to have a substantially higher leverage ratio.
“Given that the UK has at least three important players with a ratio at about 3 per cent, the difference will mean a change of behaviour, with mortgages most affected.”