A fifth of Lloyds Banking Group mortgage customers were in negative equity at the end of June, figures from the bank have revealed.

Halifax owner Lloyds said falling house prices were to blame for the figure, although high loan-to-value mortgages would have left homeowners at greater risk of owing more than their property was worth.

Lloyds said total mortgage lending by its high street business was £18.3 billion in the first half of the year, nearly 60% less than the figure in the same period last year.

The firm said the overall mortgage market for both house purchase and re-mortgage had "slowed considerably" with a 55% drop in lending as low interest rates on lenders' standard variable rates dissuade home owners from looking for new deals.

The proportion of customers in negative equity jumped to 20.4% by June 30, from 16.2% in December.

The lender also revised its predictions for house price falls today to 7% or less during 2009, from an initial 15% forecast.

A spokeswoman for Lloyds said neither of the main Lloyds TSB or Halifax lending businesses had ever offered more than 100% mortgages, although she said the Birmingham Midshires arm had offered a 125% deal that was withdrawn from the market last February.

Within the figures, almost a third of buy-to-let mortgages and 25.9% of specialist loans - which include controversial self-certified and sub-prime deals - were in negative equity.

The UK's largest lender also said the rate of mortgage defaults rose in the period, with 2.44% of loans more than three months in arrears compared with 1.79% in December.

Lloyds said 1.1% of those who owed more than their home was worth were more than three months in arrears.

Across the whole high street business - including personal loans and credit cards - bad debt charges rose 60% on last year, to £2.2 billion, due to rising unemployment and falling house prices.

Lloyds said the increase in joblessness this year means it expects a moderate rise in bad debt charges in the second half of the year for the division, which should represent the peak of its impairments.

The bank stopped all sub-prime and self certified mortgages at the beginning of the year and said it would now focus on prime lending.