HBOS scraps mortgage share target

In a sign that all is not well in the mortgage market, HBOS has scrapped its target for mortgage market share.

HBOS chief executive Andy Hornby said: “Now is the time for the clear leader in the mortgage market to deliver the right balance between volume, margin and credit risk.” Hornby believes that the ready availability of credit has meant that the risk of bad debts has become ‘mis-priced’, and HBOS plans to be more cautious.

In the past three years HBOS has aimed for a 15-20% share of the mortgage market, but it is now easing back from such targets. The higher cost of borrowing will lead to a slowdown in the mortgage market, Hornby says. HBOS will be making judgments between volume and margins as each month passes, rather than growing its share of the market for the sake of it.

When credit was cheap in recent years, the mortgage market was flooded with cheap loans as lenders tried to get as many borrowers on their books as they could. As a result profit margins on mortgages have fallen to very low levels. Now, lenders are increasing rates to try and increase their profit levels on mortgages as credit elsewhere becomes harder to come by.

Meanwhile the affect of rising interest rates means that less young adults are able to own their homes. In 1993, 60% of 25-29 year-olds owned homes, but now the figure has fallen to 47%. Housing Minister Yvette Cooper said the figures demonstrated the national housing shortage which has pushed up prices. Miss Cooper said: “In the last few weeks and months, we have seen councils in the South-East and Yorkshire oppose proposals for increased housing. Today’s figures show that every region needs more homes and every council needs to do its bit to help future first-time buyers.”

Other critics, however, blame the government for not re-igniting the industry. New building levels are at their lowest since the Second World War, and revenue from stamp duty is at record levels, giving home buyers a major headache when trying to finance a purchase.