Britain's largest mortgage bank Halifax is cutting its mortgage rate to 6.75 per cent from 7.5 per cent. This has triggered a price war in the highly competitive British mortgage market.
Halifax today announced pre-tax profits of £1.715 billion sterling (euro 2.5 billion) for 2000 - up 7 per cent from the previous year.
The bank said its share of new mortgages was 10 per cent (up from 6 per cent the year before) but still well below its 19 per cent share of existing mortgages.
This was expected given that Halifax has aggressively cut existing mortgage rates and is offering high interest rates on current accounts.
Among fellow players Abbey National has managed to raise profits by 11 per cent as it steered its business away from mortgages. The smaller Alliance & Leicester reported a profit fall last week.
Halifax's shares have been in the doldrums and underperformed banking peers as well as the overall market in the last three years.
The shares fell 21p or 3 per cent to £6.87 on the London market after today's results.
Like its mortgage peers, Halifax has been proclaiming its independence but analysts are betting on a consolidation move from Halifax, possibly by becoming a takeover target like Abbey National which is being "stalked" by Lloyds TSB.