HBOS, the UK's biggest mortgage lender, yesterday gave its gloomiest assessment yet of the housing market, saying it expected prices to fall by 9 per cent this year and that housing transactions would be down 45 per cent this year.

The bank, which yesterday published the prospectus for its £4bn ($7.9bn) rights issue, said trading was "satisfactory" although mortgage arrears were rising - particularly in its specialist home loans book.