Internet and telephone bank First Direct has closed its doors to new customers seeking mortgages while two other lenders raised their rates for existing ones.
First Direct said it was temporarily withdrawing its home loans range from 5pm yesterday after receiving five times the usual volume of applications in recent weeks. At the same time, NatWest and Royal Bank of Scotland as well as Kent Reliance Building Society became the first lenders this year to raise their variable mortgage rates for its customers.
Meanwhile, the number of mortgage approvals has fallen by nearly 40 per cent during the past year, figures showed today.
Just 73,000 home loans were approved for people moving house during February, compared with 120,000 in the same month of 2007, the Bank of England said.
The total was the second lowest since July 1995, after mortgage approvals dipped to 72,000 in December.
First Direct said the “unprecedented” level of business it was receiving meant it was taking longer to process applications than it would like.
It added that it had decided to withdraw its range from people who were not already customers until it had cleared the backlog, rather than raise its rates in a bid to discourage borrowers.
First Direct chief executive Chris Pilling told reporters: “The flood of interest in our mortgages has meant we’re taking longer than we’d like to handle applications, especially from non-customers.
“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.”
The group will continue to offer mortgages to existing customers, even if they do not currently have their home loan with it.
First Direct, which is part of the HSBC group, has 1.2 million customers and employs 3,400 people.
Meanwhile, NatWest and Royal Bank of Scotland, which are part of the same group, announced they were increasing the rate on their variable rate offset mortgage from 6.2 per cent to 6.45 per cent from yesterday.
One Comment
“First Direct said the “unprecedented” level of business it was receiving meant it was taking longer to process applications than it would like”
I think what they mean is the crisis in the US sub-prime mortgage market means that banks are now having great difficulty raising money from each other. But then perhaps if they had been a bit more careful about who they lent money to they wouldn’t be in this mess now.
And there was me thinking you needed brains to manage a multi-billion pound banking empire!