Sir Bob Kerslake: HBOS deal could hit mortgage lending

The boss of the government's new housing and regeneration superquango has said the merger between Lloyds TSB and HBOS could result in a further reduction in mortgage lending hitting the already severely damaged housing industry.

Sir Bob Kerslake, Homes and Communities Agency chief executive designate, said it was too early to say how the move, confirmed by Lloyds TSB this morning, would play out, but that HBOS had an "absolutely critical" role in the housing industry.

Kerslake, speaking at the Resi '08 conference in Newport, said of the bank, which already lends one in five of all mortgages in the country: "It's not just their overall lending volume, it's that they have a much higher proportion of first-time buyers among their customers than anyone else. We don't know how it will play out, but this is very serious stuff.

"Clearly a collapse would have been a catastrophe, but it's still too early to say what the effect of the merger will be.

"We have to hope that the Halifax's policies will be sustained, otherwise the effect on mortgage lending will be even more serious than what we've seen so far."

Many housebuilders have blamed the banks reduction in mortgage lending for the 12.5% collapse in house price seen in the last twelve months. Together Lloyds and HBOS have over 28% of the UK mortgage market.