Halifax margins suffer in mortgage price war

Halifax, the UK's biggest mortgage lender, yesterday released figures that showed it was paying a price for holding on to customers in the battle between high-street banks.

Halifax, the UK's biggest mortgage lender, yesterday released figures that showed it was paying a price for holding on to customers in the battle between high-street banks.

Halifax said margins were being eroded due to its policy of offering 1 million of its customers more competitive mortgages. The margin erosion could be as high as 10 per cent next year, the bank said.

Halifax will also take a £50m hit from its current accounts paying 4 per cent interest, to be launched in January, plus another £50m from new loans and credit-card rates. The shares rose 3p to 630p after the trading update ahead of its year-end results in February.

Martin Cross, an analyst at Teather & Greenwood, said: "This update bodes badly for the year-end results. If profit had been in line with expectations they would have said so."

Analysts were also unhappy about a larger-than-expected loss from its 50 per cent investment in Lex Vehicle Leasing. Halifax and its partner, Lex Service, will each book a £45m one-off loss this year due to the depressed prices of used cars.

The bank defended its strategy of offering more generous rates. "If you are a mortgage bank you either sit back and let your book be taken away, or you hang on to it and take the pain now rather than later."

Halifax said it had a 10 per cent share of net new mortgages this year. Overall it has 19 per cent of mortgages.