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Mortgage arrears rise at HBOS

Monday, 3 November 2008 2:19 PM

Mortgage arrears and defaults on unsecured lending at HBOS have risen, with arrears mortgages now representing 1.55 per cent of the total.

Arrears on self-certified mortgages, which represent 12.6 per cent of the lender's total home loans, rose to 3.59 per cent.

The increase in arrears, together with the decline in house prices, has resulted in a £440 million charge for the nine month period to 30 September 30th 2008 - over double the £213 million at June 30th 2008.

The decline in house prices has also impacted the average loan-to-value (LTV) of the bank's mortgages.

The average LTV ratio of HBOS's mortgage book was 52 per cent at the end of September 2008, compared to 48 per cent at June 30th 2008.

Corporate lending has also suffered, particularly in the construction and real estate sectors, HBOS added.

HBOS said its strong brands and leadership position for retail banking will see it through the recent financial turmoil and it will take a more "selective" approach to international and corporate markets.

"While the credit environment will remain challenging, HBOS's robust capital position, to be further enhanced by the injection of capital and liquidity facilitated by the UK government, reinforces the group to meet such challenges," HBOS said in a statement.

Repossessions soared by 71 per cent in the three months to the end of June, according to the Financial Services Authority (FSA).

As more homeowners struggle to pay their mortgage, this figure is expected to rise.

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