Abbey, the Spanish-owned bank, overtook Halifax as Britain's biggest lender of new mortgages in the first half of the year, selling more than one in four such loans.

António Horta-Osório, Abbey's chief executive, said that he had snapped up market share when rivals pulled out of mortgages because of funding difficulties.

Abbey sold 26 per cent of new mortgages in the six months to June 30, compared with 6.6 per cent in the same period last year, when the bank held back because margins were low.

Mr Horta-Osório said that lending would fall back again in the second half of 2008 as the mortgage market stabilised. Abbey refused to comment on its market share targets, but it is expected to take closer to 16 per cent of new lending in the second half.

Santander, Abbey's parent, offered £1.3 billion for Alliance & Leicester (A&L) this month. Until that deal is complete, Halifax, which is part of HBOS, will remain Britain's biggest lender, with a 20 per cent share of the mortgage market. Abbey has almost 13 per cent and will climb to just over 20 per cent once it has integrated with A&L.

Santander had been linked in one report with a consortium bid for HBOS, but yesterday Alfredo Sáenz, Santander's chief executive, said that it had what it wanted in Britain.

HBOS said last year that it would no longer target mortgage market share, but Louise Cuming, head of mortgages at moneysupermarket.com, said that it had dropped its mortgage rates three times this month, an indication it is unhappy to have lost business.

Abbey contributed £485 million in profits to its Spanish parent company, up 20 per cent on the first six months of 2007. Unlike other global banks, Santander avoided losses in the credit crunch and could supply Abbey with funding to increase its business while its high street rivals struggled to raise billions of pounds from investors.

Abbey tightened its deposit requirements, lending only 1 per cent of new mortgages to people with less than a 10 per cent deposit in the second quarter. Sixty-three per cent of Abbey's customers stayed with the bank when they remortgaged in the first half, up from 48 per cent last year.

The bank funds about 60 per cent of its lending with deposits and customers put £2.9 billion into Abbey bank accounts in the first half, up by more than 50 per cent on a year earlier. Credit card sales rose by 135 per cent after it launched its Abbey Zero card.

Abbey said that it expected house prices to be down by between 5 per cent and 7 per cent this year.

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