António Horta-Osório however stressed that Lloyds would not leave sensitive customer segments such as first-time buyers high and dry.
The Lloyds chief told analysts his plans during a call about the bank’s first quarter lending figures.
Horta-Osório also said he planned to increase the bank’s share of the savings market from 23% to 25% to fully fund its mortgage lending.
He said: “This is not about any concern over the UK economy, our expectations haven’t changed. This is about better aligning our lending and deposit funding.”
David Hollingworth, associate director, communications at London & Country, said the move was not entirely surprising.
He said: “Their products are not particularly aggressive right now and would agree with their positioning.”
Hollingworth warned that seeing a major player like Lloyds reduce its market share was a clear indication that lending appetite and availability would be low.
And he added: “You can see moves like this as a general tone market. Mutuals seem to be moving up and stepping up their mortgage lending though.
“Coventry, Nationwide and the mutual sector as a whole look well placed to pick up in lending but how much slack they can take up is the question.”