First direct bucks trend by cutting mortgage rates

30 May 2008 / by Rachael Stiles
First direct has chosen a different approach to mortgage lending as it announces a rate cut on its popular fixed rate mortgages.

The news comes in the wake of a contradictory announcement from Abbey. Only two weeks ago, Abbey cut its rates but announced a swift u-turn earlier this week as it raised rates on new fixed rate mortgage deals by between 0.15 and 0.56 per cent.

The rate cuts on first direct mortgages come just weeks after the lender announced it was resuming the sale of mortgages to new customers after a six week halt. Both steps indicate the bank – a division of HSBC – remains in a strong lending position.

Since the credit crisis began to constrict mortgage criteria, first direct found itself inundated with applications for its popular and competitive mortgage deals. Consequently, the bank was forced to withdraw its entire mortgage range for new customers, but the bank has since resumed these services.

While several banks have fallen victim to sub-prime lending and been forced to make cash calls, first direct (and HSBC) has so far remained unscathed, and these latest rate cuts emphasise this.

Meanwhile Barclays' home loan arm, the Woolwich, has joined Abbey in raising its mortgage rates with hikes of up to 3 per cent. Speaking of first direct's rate cuts, chief executive, Chris Pulling, said:

"We regularly review our fixed rate mortgage offers to make sure they're competitive. Today we're reducing the cost of our popular two year fixed rates, which is likely to give them a prominent place in the best buy tables."

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