HBOS and Lloyds TSB merger could 'erode competition'

The impending merger of HBOS and Lloyds TSB could have a detrimental effect on the mortgage market, according to moneysupermarket.com.

Louise Cuming, head of mortgages at the price comparison website, said the two giants control a large section of the market and the merger could damage competition.

Ms Cuming stated that a total of six major mortgage brands - Lloyds, Cheltenham & Gloucester, Halifax, Bank of Scotland, BM Solutions and Intelligent Finance - are controlled by the two lenders.

"We need to wait and see how many of these survive the merger. Obviously if some of these disappear, customer choice and competition will be eroded, which can only be to the detriment of borrowers," she explained.

Ms Cuming added that the merged operation could have a diminished appetite for higher risk specialist lending, which may leave borrowers without a clean credit rating or a sizeable deposit in the lurch and see the first-time buyer market stagnate even further.

Meanwhile, the traditional type of self buildmortgage is on an arrears basis and lenders will often provide up to 95 per cent of the cost of the land and up to 95 per cent of the cost of the build.