Sorry I misread your answer.
On heating & hot water the boiler will work on central heating only with the diverter in the central heating position. On turning on a hot tap the boiler senses the flow in the domestic circuit and switches the boiler and diverter over to hot water only. Were you...
The diverter is not a mid position, combis work on hot water priority. If it had failed mid way then the hot water would be lukewarm at best and the radiators would start to warm up as the hot water was being used and the OP does state this to be happening.
This would suggest room stat to zero and boiler stat to zero. In this state boiler will only respond to hot water demand, which it does. If the boiler then supplies heating when stats are turned up the diverter valve must be working ok,