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More mortgage deals are withdrawn More mortgage deals are withdrawn
(about 22 hours later)
More banks have withdrawn mortgage deals following First Direct's decision to suspend its entire range.More banks have withdrawn mortgage deals following First Direct's decision to suspend its entire range.
The bank, which is part of HSBC, said the withdrawal was to allow it to cope with the unprecedented demand for its range of mortgages.The bank, which is part of HSBC, said the withdrawal was to allow it to cope with the unprecedented demand for its range of mortgages.
The Co-operative Bank appears to have had the same problems and has withdrawn its two-year mortgage deals.The Co-operative Bank appears to have had the same problems and has withdrawn its two-year mortgage deals.
The US investment bank Lehman Brothers is also withdrawing from the UK mortgage market.The US investment bank Lehman Brothers is also withdrawing from the UK mortgage market.
Its Southern Pacific and Preferred Mortgages will stop taking new business at the end of the day.Its Southern Pacific and Preferred Mortgages will stop taking new business at the end of the day.
TemporaryTemporary
First Direct stressed that it is only temporarily ending mortgage offers to people who are not already its customers.First Direct stressed that it is only temporarily ending mortgage offers to people who are not already its customers.
Many providers have withdrawn mortgages or raised interest rates this year, leaving some smaller banks and building societies unable to cope with demand.Many providers have withdrawn mortgages or raised interest rates this year, leaving some smaller banks and building societies unable to cope with demand.
First Direct says applications have been five times its usual levels.First Direct says applications have been five times its usual levels.
"The flood of interest in our mortgages has meant we're taking longer than we'd like to handle applications, especially from people who are not existing customers," said First Direct chief executive Chris Pilling."The flood of interest in our mortgages has meant we're taking longer than we'd like to handle applications, especially from people who are not existing customers," said First Direct chief executive Chris Pilling.
We want to be back in the market as soon as possible Chris Pilling, First Direct Mortgage approvals at new lowWe want to be back in the market as soon as possible Chris Pilling, First Direct Mortgage approvals at new low
"Rather than increase interest rates dramatically to discourage new applications, we've decided to withdraw temporarily from offering mortgages to non-customers until we've cleared the backlog.""Rather than increase interest rates dramatically to discourage new applications, we've decided to withdraw temporarily from offering mortgages to non-customers until we've cleared the backlog."
Products withdrawnProducts withdrawn
According to Moneyfacts, mortgage products on offer have fallen by 20% over the last week.According to Moneyfacts, mortgage products on offer have fallen by 20% over the last week.
It's clear that people will flock to any lenders still able to offer attractive rates Richard, Finchampstead Your comments on First DirectIt's clear that people will flock to any lenders still able to offer attractive rates Richard, Finchampstead Your comments on First Direct
As a result of the continuing credit crisis, the interest rates at which banks lend money to each other are, unusually, far above the Bank of England's base lending rate.As a result of the continuing credit crisis, the interest rates at which banks lend money to each other are, unusually, far above the Bank of England's base lending rate.
And the banks are finding it much more difficult to raise money from credit markets for mortgage-backed securities.And the banks are finding it much more difficult to raise money from credit markets for mortgage-backed securities.
That has made it uneconomic for some institutions to carry on offering mortgages and thousands of products have been withdrawn already this year.That has made it uneconomic for some institutions to carry on offering mortgages and thousands of products have been withdrawn already this year.
Figures on Wednesday showed the number of new mortgages approved for house purchase fell slightly in February to just 73,000. This figure was 39% lower than the same month a year earlier.Figures on Wednesday showed the number of new mortgages approved for house purchase fell slightly in February to just 73,000. This figure was 39% lower than the same month a year earlier.
Raising ratesRaising rates
First Direct is the first bank to withdraw its entire range to non-customers, although the Bath and Earl Shilton building societies took the same step last month.First Direct is the first bank to withdraw its entire range to non-customers, although the Bath and Earl Shilton building societies took the same step last month.
Last week, the Nationwide building society, one of the UK's biggest mortgage lenders, raised its interest rates significantly on new fixed and tracker deals.Last week, the Nationwide building society, one of the UK's biggest mortgage lenders, raised its interest rates significantly on new fixed and tracker deals.
It said this was both because of the increased cost of raising the funds and the need to cope with demand.It said this was both because of the increased cost of raising the funds and the need to cope with demand.
Many other lenders are demanding bigger deposits with mortgages of 100% or more of a property's value having all but disappeared.Many other lenders are demanding bigger deposits with mortgages of 100% or more of a property's value having all but disappeared.
More remortgagingMore remortgaging
Although the number of first-time buyers and other house movers has been falling, more than a million people will see their short term fixed rate deals expire this year.Although the number of first-time buyers and other house movers has been falling, more than a million people will see their short term fixed rate deals expire this year.
As a result, they are starting to look around to find a better deal from other lenders, as well as their existing one.As a result, they are starting to look around to find a better deal from other lenders, as well as their existing one.
The situation has been made worse by the near-collapse of the Northern Rock.The situation has been made worse by the near-collapse of the Northern Rock.
What we have seen elsewhere in the market is a continual leap-frogging of rates where lenders have been re-pricing upwards David Hollingworth, London and CountryWhat we have seen elsewhere in the market is a continual leap-frogging of rates where lenders have been re-pricing upwards David Hollingworth, London and Country
What was the UK's busiest lender last year has now withdrawn from the market, leaving many of its customers looking for another lender.What was the UK's busiest lender last year has now withdrawn from the market, leaving many of its customers looking for another lender.
'Leap-frogging''Leap-frogging'
David Hollingworth, of the mortgage brokers London and Country, said First Direct had taken a drastic step to cope with demand.David Hollingworth, of the mortgage brokers London and Country, said First Direct had taken a drastic step to cope with demand.
"It's been topping the best-buy tables for quite some time now. As a consequence, they have been clearly attracting a lot of interest from borrowers," he said."It's been topping the best-buy tables for quite some time now. As a consequence, they have been clearly attracting a lot of interest from borrowers," he said.
"What we have seen elsewhere in the market is a continual leap-frogging of rates where lenders have been re-pricing upwards. That leaves another lender exposed to being very competitive and they receive a deluge of new business."What we have seen elsewhere in the market is a continual leap-frogging of rates where lenders have been re-pricing upwards. That leaves another lender exposed to being very competitive and they receive a deluge of new business.
"That's what has been driving up rates in recent months," he added."That's what has been driving up rates in recent months," he added.
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