Mortgage deal to write off Lloyds' £480m interest costs

Published on Tuesday 24 February 2009 08:55

THE new Lloyds banking group is to promise to offer more mortgages and business loans on the condition that the Government waives £480 million annual interest charges the bank is due from the recent bailout funding.

It is believed the Chancellor, Alistair Darling, is prepared to miss out on the yearly interest generated from the 4 billion conversion of government preference shares.

This is on the understanding that bosses at the new group – which includes the former HBOS arm – up the amount of loans to small businesses and mortgages they offer to kick start areas of the economy and the housing market.

The measure is thought to be a means of helping ease the pressure on Lloyds without the Government having to increase its stake beyond the current 43 per cent.

Lloyds is due to provide full-year results on Friday, set to include 10 billion of losses at HBOS.

Meanwhile, it emerged today that some senior City bankers are demanding pay rises of up to ten per cent to compensate for the reigning in of the bonus culture.

It was reported that wages in the financial sector among leading figures could double over the next few years as they try to balance their own books and prepare for the loss of huge bonuses.

Some analysts said that basic rates were already increasing by between five and ten per cent, and once the bonuses reduced significantly this would rise to make up for the deficit.