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First Direct withdraws mortgages | First Direct withdraws mortgages |
(9 minutes later) | |
First Direct has temporarily stopped offering any of its mortgages to people who are not already its customers. | First Direct has temporarily stopped offering any of its mortgages to people who are not already its customers. |
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. |
Many providers have withdrawn mortgages or raised interest rates this year, leaving some smaller banks and building societies unable to cope with demand. | Many providers have withdrawn mortgages or raised interest rates this year, leaving some smaller banks and building societies unable to cope with demand.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. |
Temporary | Temporary |
"The flood of interest in our mortgages has meant we're taking longer than we'd like to handle applications, especially from non-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 non-customers," said First Direct chief executive Chris Pilling. |
We want to be back in the market as soon as possible Chris Pilling, First Direct | We want to be back in the market as soon as possible Chris Pilling, First Direct |
"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." |
First Direct, which is a relatively small lender, stressed that the move was temporary and that it had no problem raising funds to lend. | First Direct, which is a relatively small lender, stressed that the move was temporary and that it had no problem raising funds to lend. |
"We want to be back in the market as soon as possible," said Mr Pilling. | "We want to be back in the market as soon as possible," said Mr Pilling. |
Demand | Demand |
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. |
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. |
It's clear that people will flock to any lenders still able to offer attractive rates Richard, Finchampstead Your comments on First Direct | It's clear that people will flock to any lenders still able to offer attractive rates Richard, Finchampstead Your comments on First Direct |
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 remortgaging | More 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 Country | 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 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. |
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. |
Are you struggling to get a mortgage? Were you trying to get one with First Direct? Are you affected by the issues raised in this story? Send us your comments by filling out the form below. | |