mortgage lender Halifax claimed a dramatic increase in its slice of the home loans market following a big drive for new business.

Net mortgage share rose from 12 per cent last year to 25 per cent during the six months to June 30, as the group extended its best rates to all customers.

That enabled the Halifax to hold on to existing borrowers and win more business from rivals such as the Nationwide Building Society.

The figure provided Halifax with a major lift ahead of its merger with the Bank of Scotland in September.

Pre-tax profits fell to £839m, from £885m a year earlier, as the group took a £21m hit from the merger and counted the cost of tighter margins relating to the new rates.

James Crosby, chief executive, said the changes implemented in the first half of this year had given Halifax "foundations for future earnings growth".

He added: "Halifax is in the midst of an extraordinary transformation. This year we promised outstanding sales, very tight cost control and exciting progress in our new ventures, and we have delivered."

His comments, coupled with the increase in market share, lifted shares in Halifax by five per cent during an otherwise quiet day for financial stocks.

The group also eased its dependence on the mortgage market, with profits at its long-term savings and protection division rising to £241m from £136m a year earlier.

The division was strengthened in March by the acquisition of a number of business units from the troubled mutual Equitable Life.

Retail-based operations now account for 51 per cent of all business at the Halifax, compared with about 60 per cent two years ago.

That balance should be helped by the merger with the Bank of Scotland, which is traditionally strong in the business banking sector.

As expected, profits at the bank's core retail operation fell following the drive for new borrowers.

More attractive rates for current account customers also helped drive down the retail operation's profits to £569m from £669m.