RBS set to instigate tighter lending criteria on customers to minimise long term risk

The Royal Bank of Scotland has announced that they will implement tighter lending criteria on their mortgage application procedure in order to ensure that borrowers are able to afford their secured loans.
RBS, whose subsidiaries include UK giant NatWest, will cap the amount that a mortgage applicant can borrow to four times their annual salary on all secured loans valued over £500,000. 
They have argued that the measure is in direct response to the inflationary problems in the London property market at present, where recent figures released by the Land Registry suggested that prices rose by 17% in the 12 months to March. 
RBSís actions mirror the conduct of its banking counterpart Lloyds Banking Group, who last month announced that they would also cap the amount a borrower can take out in order to minimise the risk of them defaulting on their loan repayments when interest rates eventually rise from their historic low of 0.5%. 
RBS have argued that the initiative will only impact 2.6% of its total volume of secured loan lending in the London property market, whilst this drops to just 0.5% of total mortgage lending outside the capital.   
A spokesperson for RBS and NatWest said: “We are focused on looking after the interests of our customers and ensuring that they only take on mortgage lending that they can afford.”
The new measure will be applicable to every RBS and NatWest mortgage at the end of June, and will hopefully look to address the potential problems that could arise in the future if people are not amply prepared financially for when rates rise. 
Approval decline
The news comes on the same week as the Bank of England reported that the quantity of mortgage approvals made in April dropped for the third straight month, with the Bank identifying that just 62.918 applications were accepted in April- the smallest figure since July 2013. 
The quantity of approvals reached a high in January 2014 at 75,838.
Leading analysts have argued that the stricter mortgage lending criteria imposed through the Mortgage Market Review in April have been the primary reason behind the decline in approvals.  
Under the new regulations, borrowers are subjected to a meticulous analysis of their expenditure patterns and income, with things such as net spend on hobbies and sport contributing to how much they can take out with their mortgage. 
Last week, the British Bankers’ Association (BBA) also identified that the number of mortgage approvals had decreased. 
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