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HBOS shift away from volume could cost £5bn

HBOS is expected to lose over £5bn-worth of retention business as it moves to scrap its annual lending target to focus on margin growth over volume.

The lender announced to the City last week that following a fundamental shift in the mortgage market, it will switch to taking monthly decisions on the “trade-off between volume and margins”.

John Charcol senior technical manager Ray Boulger says the lender’s retention products have become very uncompetitive. He estimates that HBOS will have £5bn-plus business maturing in the next couple of months as the result of a competitive 4.29 per cent two-year fixed-rate product that Halifax offered in the fourth quarter of 2005.

Boulger says: “Its retention scheme has become a lot more uncompetitive so for this month its policy is definitely to end up with not so much business. I estimate that brokers did over £5bn business on Halifax’s 2005 product based on the market share we did for it. For a single mortgage product, that is a huge amount.”

HBOS’s five brands have cut their product ranges and increased rates in recent weeks. Halifax recently scrapped its competitive 5.79 per cent two-year fixed-rate retention product and has not replaced it.

Director of intermediaries Nigel Stockton says: “We still intend to play our part in the mortgage market. We have not fallen out of love with it, we have decided to shift focus from one area to another.”

Chief executive Andy Hornby told a Merrill Lynch banking conference last week that its appetite for mortgages is now amber, based on a traffic light scheme, while corporate banking is green.

A spokesman admits the shift in strategy by HBOS will mean its products are not the keenest in the market. He says: “We are not going to be uncompetitive but we are also not going to be chasing volume for the sake of it.”

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