HBOS had a critical role in the housing industry as it lends one in five of all mortgages in the country, said Sir Bob Kerslake, the head of the government's new housing and re-generation quango the Homes and Communities Agency.
And although it is too early to say how the merger will play out there can be little doubt it will have a serious effect, he said.
'It's not just their overall lending volume, it's that they have a much higher proportion of first-time buyers among their customers than anyone else. We don't know how it will play out, but this is very serious stuff,' he said.
'Clearly a collapse would have been a catastrophe. We have to hope that the Halifax's policies will be sustained, otherwise the effect on mortgage lending will be even more serious than what we've seen so far,' he added.
Within the UK property industry the banks are blamed for the reduction in mortgage lending which has stoked the 12.5% collapse in house price seen in the last twelve months. Together Lloyds and HBOS have over 28% of the UK mortgage market.
John Stewart, director of economic affairs at the Home Builders Federation, is one who firmly believes that the fall in house prices is down to a lack of mortgage availability not buyers waiting for the bottom of the market.
'The causes of the downturn are important to understand. This is primarily a problem of a lack of liquidity in the mortgage system,' he said.
The only bit of good news is the decision by the Bank of England to continue its special liquidity scheme to January. Announced in April, it is designed to aid the short-term supply of funding to lenders. The scheme was due to end on 21 October and its extension marks a u-turn by the bank.
But there are no signs that lending is increasing. The latest figures from the Council of Mortgage Lenders shows that gross mortgage lending fell 36% from a year ago to £21.8 billion.
'These figures reflect the heightened uncertainty for both lenders and consumers in the mortgage market at present. Lenders are uncertain about future sources of funding and the cost of funding, while consumers are unsure about how much further and for how long house prices will continue to decline,' said CML director general, Michael Coogan.
