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First Direct withdraws mortgages

First Direct withdraws mortgages

Tuesday, 1 April 2008 12:00 AM

Internet bank first direct is to temporarily suspend the sale of all mortgage products in an attempt to clear a backlog of customer applications.

Effective from 17:00 April 1st the HSBC division will suspend all products including its two-year fixed rate offset mortgage (4.95 per cent), from sale to non-first direct customers.

Existing first direct customers, whether in possession of an existing mortgage or not, will continue to be able to access the company's existing range of products.

However, the lender will not return to the market until what it is calling an "unprecedented number of applications for its home loans" has been cleared.

"We have seen unprecedented demand for our mortgages since January thanks to our highly competitive pricing and the decision of other lenders to raise rates. As a result, we're currently seeing applications running at five times our normal volumes," explained first direct´s chief executive, Chris Pilling.

"First direct won its reputation for its amazing customer service and our first priority is to ensure we give all our customers the level of service they expect from us."

The decision from the internet company follows a host of other lenders who have also left the mortgage market since the credit crunch began to take a toll on liquidity late last year.

Scottish Widows and Alliance & Leicester both have curtailed their product ranges, while Northern Rock has deliberately been offering unattractive rates to deter lenders.

"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," continued Mr Pilling.

"I'd like to apologise to customers for any delays they may have experienced and give them my commitment that we'll not rest until we've restored first direct's normal standards of service."

Commenting on the decision Drew Wotherspoon, of mortgage brokers John Charcol, said: "In a market that is moving with alarming pace, it is little surprise first direct has made this decision.

"However, what is surprising is that they had a product that has been so market leading for so long while others have turned their back on attracting new borrowers.

"The pricing has been more or less 0.5 per cent better than its nearest competitor, some might say unnecessarily."