First Direct suspends lending to new customers

First Direct has suspended lending to all new customers as a result of an application backlog.

Although it will continue to offer mortgages to existing customers it says the suspension will allow it to focus its efforts entirely on processing the unprecedented number of applications for its home loans in recent weeks.

It says it will resume offering mortgages to non customers when the backlog has been cleared.

Chris Pilling, chief executive of First Direct, says: “We’ve 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.

“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.

“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.”

First Direct’s products have been top of the best buy tables for a number of months and industry pundits say service was bound to ultimately have been a problem, with or without the credit crunch.

David Hollingworth, head of communications at London & Country, says: “While other lenders have been repricing to manage volume to stem the flow First Direct has been best buy material for three or four months.

“So they’ve got themselves into a situation where more drastic action is required.

“It is symptomatic of where all lenders are – not that they haven’t got money to lend, just that they can’t cope with the business they attract.”