Pitman expects to come out on top in mortgage price war
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Your support makes all the difference.BRIAN Pitman, Lloyds' chief executive, has predicted that the takeover of Cheltenham & Gloucester will precipitate a mortgage price war.
But he said yesterday the merged mortgage operation between the two would allow it to dominate the market.
'This deal will so upset the competitive equilibrium in our favour that we should be able to win against the competition,' he said.
The combination of Lloyds' heavy- weight power in the money markets and C&G's low cost base is the recipe for delivering competitive mortgages while still making profits on home loans.
'Even if we have an absolute price war on mortgages, because such a small amount of money is absorbed in costs we will be able to take a decent return on capital,' he said.
Lloyds' cost/income ratio is 60 per cent, compared with an average for building societies of 48 per cent, while C&G's is the lowest-cost society at 26 per cent.
C&G will retain its separate identity after the takeover, offering mortgages and savings. It will also be responsible for Lloyds home loans. It will operate a separate treasury operation, but as part of Lloyds it will be able to command finer rates without having to take 60 per cent of its funds from savers.
Ian Darby, marketing director of John Charcol, the mortgage broker, said: 'We are already in the midst of a frantic battle for market share. A lot of products in the market now don't make much financial sense - they are loss-leaders. I'm not convinced that, with the big players hungry to lend, there is a lot more to be squeezed.'
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