UPDATE 1-RBS tightens mortgage lending, following rival Lloyds

Tue Jun 3, 2014 1:49pm EDT

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* Move additional safeguard on top of affordability checks

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LONDON, June 3 (Reuters) - Part-Nationalised Royal Bank of Scotland has followed rival Lloyds Banking Group in placing restrictions on mortgage lending to tackle rising British house prices.

RBS, which is 81 percent owned by the government, will introduce a four times loan-to-income cap and maximum term of 30 years for all mortgages worth 500,000 pounds ($837,000) or more, according to sources familiar with the matter.

The move is designed to be an extra safeguard on top of the affordability checks RBS already has in place.

"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 bank said on Tuesday.

Britain's house prices rose at their fastest annual pace in nearly seven years last month, fanning concerns that the property market could be overheating.

Bank of England Governor Mark Carney has singled out the housing market as the biggest threat to Britain's economic recovery and the European Commission has said the government should consider scaling back its Help to Buy mortgage scheme.

RBS on Tuesday reiterated its support for the scheme, which provides guarantees for mortgages worth up to 95 percent of the value of a property.

The bank has only a 9 percent share of the mortgage market in London, where house prices have risen the most, and one of the sources said the move will affect only about 2.6 percent of the bank's lending in the capital. ($1 = 0.5974 British Pounds) (Reporting by Matt Scuffham, editing by William Hardy)

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