Halifax grabs larger share of shrinking mortgage market

HALIFAX Building Society has almost doubled its share of the new mortgage market since last year and was handling near record numbers of completions in the weeks before stamp duty was re-introduced in August.

The society, the biggest with 1.8 million borrowers, lifted gross new lending from pounds 3.9bn to pounds 4.6bn in the six months to 31 July, boosting its share of the shrinking mortgage market from 10 per cent to 19 per cent.

David Gilchrist, a Halifax general manager, denied that the lending surge would produce an outbreak of bad debts later, a common outcome after a lending spree. The society's lending criteria had actually been tightened, he said.

Halifax set aside pounds 135m of provisions for sour and doubtful loans for the half year, up from pounds 123m last time. Most of the write-offs were against residential mortgages, although pounds 14m was for commercial and credit-card debt.

Borrowers more than six months in arrears showed no change, but there was a slight improvement in shorter arrears. Repossessions were 40 per cent lower than in the second half of last year because of the society's new 'forbearance policy'.

Despite the rising level of bad debts, pre-tax profits edged 4 per cent higher to pounds 318m. Total assets rose 4 per cent to pounds 61bn, including a mortgage loanbook of more than pounds 50bn.

Halifax is thought to have taken market share from wholesale-funded lenders, most smaller building societies and some large rivals, including Alliance & Leicester and Nationwide.

On the savings side, net retail receipts plunged from pounds 2.4bn to pounds 1.2bn, partly because of the fierce competition from National Savings. Its market share of liquid savings fell from 15 per cent to 9 per cent. Halifax has about 12 million savings accounts.

The society raised 14.7 per cent of funds in the wholesale money markets, a slight increase from 13.6 per cent last time, but still lower than most in the industry.

The net interest margin - the difference between lending rates and savings rates - shrank from 2.15 per cent to 2.04 per cent.

Halifax Property Services, the estate-agency arm, lost pounds 4.4m because of the shortage of property transactions. However, it had increased its market share to 5 per cent, Mr Gilchrist said.

The gross capital ratio, a measure of balance-sheet strength, improved from 5.33 per cent to 6.02 per cent.

On the question of demutualisation, Mr Gilchrist said: 'We see no strong arguments for converting from our mutual status.'

Takeovers of other societies would be an option: 'If it's in the interest of our members and it doesn't weaken our capital base, we're prepared to consider it.'

Jon Foulds, Halifax chairman, said: 'These are good figures in a bad market. Our earlier decisions to make realistic provisions for bad debts and concentrate on cost control and quality lending have been vindicated.

'It is unrealistic to look for an improved second half-year, and after yesterday's events we remain even more concerned about the continued depressed state of the housing market.'