Halifax Bank of Scotland (HBOS), the UK’s largest mortgage lender, has been bought by Lloyds TSB for £12.2bn. This followed a dramatic few days on the global financial markets in which Lehman Brothers filed for bankruptcy, Bank of America bought Merrill Lynch, the US Government rescued AIG and HBOS’ shares fell as confidence in the banks’ ability to stay afloat waned.

The deal has been backed by the Government who said that they will use the ‘national interest’ clause in the law that created the competition authorities to bypass any concerns which could have been raised about the size of the institution which the take-over will create.

Lloyds TSB described the purchase as a ‘unique opportunity’ but admitted that savings would have to be made. The banks now have a combined workforce of 145,000 and 3,000 branches across the UK.

Melanie Bien, director at Savills Private Finance (SPF), told PIN: “It is a good thing that something has been done. It shows the dire situation the financial markets are in when the UK’s largest mortgage lender has effectively been taken over. The Government would never have allowed HBOS to fail as it would have caused too much instability in the sector. In the long-term the big question is one of competition. HBOS and Lloyds TSB always competed against one another. When one lender cut its rates the other would often follow suit. I think that we could eventually see rates rise due to this lack of competition.”