First Direct has become the first bank to withdraw its mortgage range from sale to new customers.
The blow comes just days after leading high street lender Nationwide pulled the plug on its most popular deals and raised rates on others.
Increasing volumes of mortgage rates are being moved out of reach from customers and, according to Moneyfacts.co.uk, the number of mortgage
products available has dropped by 2,026 in the last month. These figures, coupled with the 1.4 million home owners reported by the Council of Mortgage Lenders to be coming to the end of fixed rate deals, are, according to First Direct, the reasons behind the withdrawal.
As the number of available products falls and demand grows, banks and building societies have found themselves inundated with new mortgage applications of levels they cannot cope with. Chris Pilling, First Direct’s chief executive said: "We’ve seen an 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."
The move to withdraw its popular 4.95 per cent, two year fixed rate mortgage
deal to new customers is only temporary; according to First Direct it will resume offering its mortgages to 'non' customers once it has cleared the backlog of applications it has been bombarded with.
Mr. Pilling continued, "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. 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."
In the meantime First Direct’s parent company, HSBC continues to offer new customers a similar deal in the form of a two year fixed rate at 4.99 per cent, much lower than many deals that have risen above the 6 per cent mark in attempts to manage application volumes. Mr. Pilling concluded:
"We’ve made arrangements for our parent company, HSBC, to make available a similar two year fixed rate to non customers to help them with their mortgage needs in the meantime."
Despite this drastic move, there is no suggestion that First Direct is in financial trouble. Applicant volumes have also hit building societies hard, and several have been forced to make similar moves and pull deals all together, rather than raising rates as a deterrent.