Lloyds TSB, the country’s fourth largest mortgage lender, heaped new misery on homeowners yesterday after forecasting a 10% fall in house prices over two years. Daily Telegraph

The forecast was made as the bank indicated it would not need to follow Royal Bank of Scotland and HBOS in raising new capital and stressed that it was 'firmly on track to deliver a good performance in the first half despite the challenging conditions' after delivering 'double-digit profit growth in the first quarter' excluding exceptional write-downs.

Acting finance director Tim Tookey said the bank was predicting 'a 10% reduction in house prices in 2008 to 2009' and that it had made “slightly higher provisions on its mortgage book” as a result. Arrears levels are currently at roughly the same as last year, he added, as the strains in the housing market have yet to fully emerge.