A perfect storm is brewing in the UK mortgage market, whipping competition among lenders to unusually ferocious levels. For one thing, rising interest rates have started – at last – to choke demand. Figures from the British Bankers’ Association, speaking for 12 of the country’s 15 largest lenders, show that house purchase approvals in June were down 11 per cent year-on-year. Another inducement to keener pricing comes with this year’s Basel II regime, under which mortgage players will see their capital requirements fall, relative to other lenders’ needs.

Then there is a renewed assault on the market from HBOS. The UK’s largest lender by stock of loans vowed last week to make up lost ground. During the first quarter, its attempt to reduce the pricing gap between new and existing customers saw the bank’s share of new lending slip to low single figures, its worst level for seven years and a fraction of its normal 15-20 per cent share of new business.