RBS to limit home loans in London property hot spots

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Royal Bank of Scotland was yesterday the subject of an embarrassing revelation in an internal document which suggests that "influential" people are more likely to receive a mortgage from the bank than unimportant people.

The gaff by RBS came in a circular to staff last month which said that loans in certain areas of London would have to be reduced because house prices had risen so high that further increases were unlikely.

The Scottish bank said the guidelines could be overturned in "exceptional circumstances". These include if "the customer is influential in the community".

This is the latest public relations scandal to hit banks recently, after guidance by Halifax to employees that it did not want to take on certain sections of the workforce including cabbies and window cleaners. The bank, now part of HBOS, apologised to customers.

RBS yesterday said it would immediately change the wording of the document, which came to light in a survey by Money Marketing, and denied that it discriminated on the basis of how influential its customer was.

"We cannot begin to differentiate between people in the community and we do not take lending decisions on any other basis than the financial relationship we have with that customer," a RBS spokesman said.

RBS follows Alliance & Leicester in introducing a controversial postcode mortgage policy because it believes house prices across one-third of the capital have peaked. NatWest, part of RBS, also discriminates on the basis of the borough customers live in.

Camden, Hackney, Lewisham and Southwark are among nine hotspots where RBS is reducing loans. In these areas the maximum RBS will loan on a house worth £350,000 or more is 75 per cent of the property's value. This compares to similarly prices houses everywhere else, where RBS is prepared to lend 85 per cent of its value.

RBS is the only major lender to offer 100 per cent mortgages on properties worth up to £150,000, but in the London hotspots the maximum is 90 per cent.