HBOS, Britain's largest mortgage bank which is raising £4 billion from shareholders, disclosed today that it had written down an additional £58 million on assets and now thinks house prices will fall this year by 9 per cent.

Today's writedown adds to the £1 billion the bank previously disclosed.

The bank was forced last week to publish a statement that the rights issue was going to plan after its share price slumped to its lowest level since the group was created in 2001. The emergency fundraising is one of a number announced as banks grapple with bad investments and a deteriorating mortgage market.

Andy Hornby, chief executive of HBOS, said today that the rights issue would go ahead even if the share price plummets again. He said: “We’re underwritten and this rights issue is going ahead.

It’s as simple as that. We are not for turning.”

In a trading statement this morning, the bank, which includes the Halifax mortgage lending business, said its performance in 2008 was "resilient" with mortgage arrears in line with expectations, despite worries about its exposure to the property market. Arrears have gone up by 17 per cent in the first five months of the year, with arrears in buy-to-let loans rising to 1.59 per cent.

HBOS was the biggest faller in the FTSE 100 in early trading, with shares down 4 per cent by 8 am. The stock plummeted earlier this year as short-sellers sold shares, prompting the Financial Services Authority to introduce new rules, starting tomorrow, that will force short-sellers borrowing over 0.25 per cent of a company's shares to disclose their holdings.

It has lent more than £4 billion to construction and property companies, such as Crest Nicholson and McCarthy & Stone. The bank said that this was mainly to niche sections of the market, including retirement housing and urban regeneration, rather than volume-led housebuilders, whose share prices have plummeted this year. It has reduced its equity exposure to the sector by writing it down to £100 million, and insists that the debt is underpinned by collateral including landbanks.

The bank also predicted that house prices in the UK would fall by up to 9 per cent this year. Economists at Halifax previously predicted a "mid-single digit" decline in house prices this year. It expects the British economy to slow further in 2008, with a rise in unemployment and low interest rates.

It said that trading was "satisfactory" and that it had continued to fund successfully in the global credit markets. Earlier this year, it posted lower than expected underlying pre-tax profits for 2007 of £5.71 billion.

Its bad debt charges last year rose 18 per cent to £1.29 billion.

HBOS also said that the growth of the business outside its lending division will be "significantly" lower than in 2007, owing to lower revenues from its corporate investment portfolio.

The bank said that its insurance business is performing well, with strong sales in home and car insurance and fewer extreme weather events than in 2007.

Analysts at Citigroup said: "Post the rights issue, we expect slower growth and lower returns. With continued uncertainty over the outlook for the UK economy and in particular the residential and commercial property markets, we believe that HBOS will trade at a discount to tangible book value."

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