Home loans are becoming more expensive for borrowers and less profitable for banks, Britain’s biggest mortgage lender said yesterday, as the continuing crisis in global credit markets takes its toll on UK homeowners.

Speaking at a Merrill Lynch banking conference yesterday, Andy Hornby, the chief executive of Halifax Bank of Scotland (HBOS), predicted a “fundamental shift” in the UK mortgage market, of which his bank holds a 20 per cent slice.

He signalled a move in the lender’s strategy, away from its traditionally aggressive push to grab market share from its rivals.

Mr Hornby told an audience of hundreds of investors that he planned to scrap the bank’s annual market share targets for net lending.

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Instead, HBOS will take month-by-month decisions about the “trade-off between volume and margins”.

There has been a “sharp reduction” in mortgage profitability, he said.

Net lending is the difference between the amount lent to new customers and the value of business lost when customers pay off loans or move to a new lender.

For the past three years HBOS has set an annual net lending target and, although it has slowed its lending this year, it continues to hold a stake more than double the size of Abbey, its nearest rival in the home loan market.

Mr Hornby predicted a slowdown in the market next year, as the cost of retail borrowing rose to reflect the higher wholesale borrowing costs incurred by the banks.

“Now is the time for the clear leader in the mortgage market to deliver the right balance between volume, margin and credit risk,” he said.

Sources said that while HBOS “hasn’t fallen out of love with mortgages”, it would turn its attention to more profitable markets.

Mr Hornby said that a reduction of leverage in corporate lending meant that HBOS would be able to compete for business better.

Previously, it had been reluctant to compromise on its credit assessments, so had lost out on business to other banks.

“We are likely to be able to increase our hold levels as competition decreases,” he said.

Mr Hornby’s comments are among a number of revelations expected to come from the conference, considered one of the most important in the banking calendar.

Last night, Josef Ackermann, the chief executive of Deutsche Bank, was under increasing pressure to reveal the scale of the writedowns at Germany’s biggest bank.

The bank is expected to take a hit of about €1.5 billion (£1 billion)

Mr Ackermann is scheduled to speak at the conference today.

Having used a similar conference in Frankfurt last month to issue a thinly veiled profit warning, he is expected to provide a fresh insight into the German bank’s financial position.

Deutsche Bank declined to comment on whether it intended to make an announcement today.

It is scheduled to report its third-quarter profits at the end of the month.

But yesterday Goldman Sachs cut its earnings forecasts for Deutsche, predicting that pre-tax profits would halve in the third quarter, from €1.8 billion to only €900 million.

As a big player in the credit and leverage lending markets, the leading German bank is seen as particularly exposed to the credit crunch.

Stefan-Michael Stalmann, of Dresdner Kleinwort, said: “We believe that there is a good chance that Deutsche will also issue a profit warning before Ackermann speaks.”

On Monday, UBS revealed that it would take a SwFr4 billion (£1.6 billion) writedown, while Citigroup said it would take a $6 billion (£2.9 billion) hit.

Morgan Stanley became the latest high-profile Wall Street credit casualty yesterday, as it announced 600 job losses as part of a retrenchment at its international residential mortgage business.

The bank's three US residential mortgage units will be consolidated into one operation, headquartered in Texas.

About 500 US jobs will go, plus 90 at Advantage, its UK mortgage subsidiary, and a further ten elsewhere in Europe.