Merger ‘will cause mortgage rates to rise’

19 September 2008

As Lloyds TSB and HBOS complete their £12.2 billion merger, a number of financial experts have speculated that mortgage rates may rise as a result.

Between them, Lloyds TSB and HBOS own around 30% of the whole UK mortgage market – leading many to suggest that the decreased competition, combined with a need to justify the cost of the buyout, may mean costs are passed on to consumers.

Jonathan Macdonald, lead analyst at the market research firm Datamonitor, said: “Consumers are being squeezed by the credit crunch, and now this lack of competition will lead to a bigger squeeze for them.”

There is also some speculation surrounding the implications for homeowners with smaller deposits. Lloyds TSB have a reputation for conservative lending, while Halifax have a broader range of clients. Some economists have suggested that the company will focus on buyers with higher deposits in order to avoid any further risks.

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