Halifax has been ousted from its position as the biggest lender of new mortgages in the UK by Spanish-owned high street bank Abbey, new figures have revealed.

The first six months of the year saw Abbey's share of the new home loan market soar to around 26%, toppling Halifax from the pole position. The firm said it wrote one in three of every new mortgages in the second quarter as it picked up business while rivals cut back on lending amid the credit crunch.

Abbey's financial performance contributed £485 million in profits to its Spanish parent group, Santander, up 20% on the first half of last year. The six months to June 30 saw the lender's net mortgage lending soar to £8.3 billion, after seeing market share rise to 16% in the first quarter and then more than doubling to 35% in the following three months.

The bank's position in the mortgage market is set to receive a further boost if Santander's agreed £1.26 billion takeover of Alliance & Leicester - announced earlier this month - goes through as expected later this year. The deal will see Abbey merge with A&L to create a business with 959 UK branches and a share of more than 8% of the savings and personal loans market.

However, Santander has already said it plans to trim its UK mortgage book after the A&L takeover as it seeks to limit exposure to the stricken housing market. Abbey is also expecting its share of new mortgage business to ease back later this year, as the shake-out in the UK home loan sector stabilises.

HBOS-owned Halifax has been the leader of Britain's mortgage sector for some considerable time. Despite being overtaken by Abbey on new home loans, it still remains the biggest overall lender in the UK by total mortgage book.

Abbey said it relies on crisis-hit wholesale money markets for just 10% of its lending, enabling it to pick up business despite the funding problems resulting from the credit crunch. With retail deposits up to £2.9 billion in the first half from £1.9 billion in 2007, around 60% of its funding now comes from customer deposits.

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