HBOS unit suspends lending

Britain's biggest mortgage-lender, HBOS, yesterday told one of its subsidiaries to suspend the issue of loans in an attempt to sort out long delays in processing applications.

The merged Halifax and Bank of Scotland group called a halt at The Mortgage Business, which is best known for its buy-to-let mortgages, to allow staff to process applications submitted in recent months.

A spokesman for the bank said the subsidiary would be open for business again at the end of August.

The bank has spent a year attempting to rectify poor service to Mortgage Business clients, mainly mortgage brokers. Increases in staff and investment in technology failed to make a significant dent in delays. The spokesman said it had struggled to cope with strong demand for mortgages and there were long backlogs.

The decision comes soon after HBOS tightened lending criteria at high street lender Halifax.

Simon Jones at Savills Private Finance questioned whether The Mortgage Business would reopen after the hiatus. "It's a very extreme step and I have my doubts it will open its doors again. It seems like quite a strange thing to do. If you want to slow down business, normally you would increase the rates you charge. I wonder if there might be a bit of rationalisation within the HBOS brands."

Ray Boulger at mortgage broker Charcol claimed the bank was trying to reduce its exposure to the buy-to-let market.