Lloyds puts cap on mortgage applications

Lloyds Banking Group has announced it will cap mortgage applications of more than 500,000 pounds at no more than four times a borrower's salary.With the average price of homes in London at £459,000, according to the Office for National Statistics (ONS), the lender's move is likely to fuel concerns over soaring prices in the City.The new restrictions on the bank's lending policy comes after the Bank of England (BoE) said mortgages of up to five times income could lead to problems in the future.BoE Governor Mark Carney warned at the weekend that accelerating prices posed the biggest risk to economy recovery.Prime Minister David Cameron on Tuesday revealed he was ready to amend the government's Help to Buy scheme if Carney suggested a change of direction to stop the market from overheating.Low borrowing costs have boosted the demand for mortgages and property in the UK but fears over a housing bubble have put pressure on the BoE to raise interest rates. Stephen Noakes, director of mortgages at Lloyds, said the decision to restrict lending was to address specific inflationary pressures in London, where house prices are up 30% from their 2007 peak."This is largely driven by issues of supply which are particularly acute in London."The announcement sparked speculation that rivals may follow suit as a report from the ONS revealed house prices had surged by an average of 17% over the past year.RD