Halifax is the country's biggest mortgage lender. However, one can have a very good idea of the situation that is prevailing if we realize that Halifax has suffered a fall of around 7% in its shares and reached 296.76p. The other banks were also brought down by the announcement that the sales of houses would fall by 45% and it would get really difficult for the borrowers to repay their home loans on time to the lenders.

To bring investors back to the rights issue which is worth £4bn, the company published a 194 page prospectus to convince them. Another revelation related to the credit crunch was made by HBOS. It said that the value of the write-downs has gone over the £1bn mark. Also, out of the corporate business field, around 38% was prone to the disturbed construction and property sectors. However, in spite of all this, the bank maintained that the business was still satisfactory and was still living up to the expectations that they had of it.

Last April, at the time of the £4bn cash call; there had been a forecast about the house prices reaching the mid-single digit. The prediction made this time is a near-doubling of the previous one. The end of the year 2007 had seen the prediction of the house prices falling flat this year. With the 5% fall already making its place in the house prices, experts still say that the situation is comparatively optimistic.

The Council of Mortgage Lenders had predicted a fall of 7%. Therefore when compared to this figure, the prediction made by HBOS was still "comfortable" for the bank, said the HBOS chief executive Andy Hornby. The last time a warning was issued by the bank was in 1989 when a 10% fall was expected.

After the issue of rights, the bank will have a measure of 6% to 7% from the now existing 5.7%. This is called as the core tier-one ratio. The bank also said that a fall by 10% in the house prices could be borne without any impact on the core tier-one ratio by the bank.

The RBS had announced its cash call of a record £12bn and has already taken the cash from the investors. However, the rights issue of HBOS was announced one week after that of the RBS and will be completed only in the mid next month.

Two weeks before, Bradford and Bingley had given shock profits warnings and reprised its rights issues. This caused a big confusion among the investors. As a result, the share price of HBOS fell by 275p per share and led to the introduction of new rules by the FSA which demand additional revelation of trading position in a rights issue.

Waving off any rumors of the rights issue being in trouble, Hornby stated, "The rights issue is completely under control and has been proceeding according to the plans. The times are difficult but we are intent on ensuring delivery."

If there is a 9% fall in the prices of their house, the customers will have to face negative equity. This is due to the fact that they have personal loans which are worth more than 90% of the equity of their property.

A modest rise in the unemployment has been warned about by the HBOS and it is the first bank to do so. This could affect the repayment ability of the people. However, the bank still claims that the levels of rise are according to the expectations and will be dealt with. A rise of 17% has been seen in the arrears in the first five months of 2008. Also, a higher increase of 24% was seen in specialist buy-to-let and self-certification. According to Hornby, the rise seen in the arrears was being compared to last year when the levels were record low. However, the mid of 2006 was seen having the same levels which means this year, the levels are just getting back.

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