Sunday, February 28th, 2010 at
12:28 pm
HSBC subsidiary First Direct has withdrawn the offer of mortgages to non-customers, further fuelling the crisis in the lending industry. Recently the bank has been receiving a deluge of applications and simply does not have the staff and resources to efficiently process the information.
Chris Pilling, First Direct’s chief executive, said: ‘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 are 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 clear the backlog.’
First Direct is the first major home loan provider to take this step and there are fears that many others will now follow this precedent. Whilst the bank is not in the same state of financial meltdown as Northern Rock – it is still offering mortgages to existing customers – First Direct have grossly underestimated the amount of business their attractive fixed rate deals would bring in.
Their decision to shut up shop to new lenders will put a further strain on the industry as a whole. Building societies Bath and Earl Shilton recently withdrew mortgage offers to non-customers and Nationwide have put up rates to try and discourage new borrowers.
Meanwhile a study carried out by the MoneyFacts website revealed that 90 mortgage products per day have been withdrawn in the past week, leading to an eight percent decrease in the available offers to borrowers. This constitutes a huge setback for the mortgage industry, which has left experienced commentators stunned. Rob Clifford, the chief executive of the brokers Mortgage Force, said: ‘This is unprecedented. We’ve never seen this number of lenders pulling a whole tranche of deals or completely closing for new business. And I think we’ll see more lenders do the same.’
Even affluent young professionals will be hit by these worrying developments with the announcements from Scottish Widows and Standard Life that they have amended their 100% mortgage deals, which required no deposit. The deals, available to barristers, doctors, accountants and other highly paid professionals, were very popular as they provided flexibility due to individual assessment and the ability to borrow a greater amount than a yearly salary on the understanding that that salary would increase.
The deals now require a five percent deposit, whilst other 100% loans from the likes of Abbey are having their interest rates hiked up to reflect the growing climate of the industry. A spokeswoman for Scottish Widows said: ‘We are looking at the whole of the market place and we not saying that we don’t trust our customers. That is not why we have made the change.’ But Melanie Bien, of mortgage brokers Savills Private Finance, commented: ‘Even professionals can’t be trusted with 100 per cent LTV any more.’
By: Mark Skinner
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Sunday, February 28th, 2010 at
11:49 am
The mortgage market could destined for a better future as lenders continue to offer reduced rates.
But with First Direct resuming mortgage lending, the signs suggest that the market could be entering a softer period in the mortgage crunch.
First Direct has also announced that it will start offering mortgages to new customers again, after pulling its range at the start of April.
The HSBC owned online and telephone lender has begun selling mortgages again to new customers. It is speculated that the re-entry by First Direct could signal an improving market and a better future for borrowers.
Since First Direct pulled out of the market, rates have risen significantly. It remains competitive but is not the cheapest on the market.
The bank’s two-year fixed rate of 4.75% had been one of the best on offer to homeowners at a monthly cost of £594 on a typical £150,000 interest-only homeloan.
Today the bank charges 5.76%, with a £499 booking fee and £1,499 arrangement fee. Monthly repayments would be £720 on £150,000. All its deals are only available up to 80 per cent loan to value and on loans of £400,000 or less.
Borrowers can get a two-year fix of 5.75% from Loughborough building society. Monthly repayments would be just £1 less at £719.
However, the deal offers a much lower £649 arrangement fee and is available up to 90% loan to value while the same cannot be said of Skipton building society which offers its customers 5.79% fixed for two years up to 95% loan to value with a £799 fee.
Following the steps of other mortgage lenders, Nationwide Building Society has cut interest rates by up to 0.3% on its fixed-rate range.
At the same time lenders such as Abbey have also cut fixed rates by up to 0.17% and trackers by 0.05%.
A significant number of mortgage lenders are now only offering top rates to those with at least a 20% or 25% deposit and charging sizeable fees including those seeking standard variable rate loans.
Borrowers hoping for an instant respite from the mortgage crunch are likely to be disappointed however, with mortgage costs still failing to fall substantially.
It is not all bad news for borrowers because on average top three-year fixed rates and tracker deals slipped back in cost slightly, by 0.1% to 6.13% and 0.05% to 6.21%, respectively.
Earlier in April, online and telephone bank First Direct temporarily ceased mortgages for new customers, saying it had received five times its normal number of applications.
The company says it has now cleared the backlog of mortgage application approvals and has begun to offer loans again at up to 80% loan-to-value, with a two-year fix at 5.76% and £499 fee.
Louise Cuming, head of mortgages at price comparison site Moneysupermarket.com, said: “This is welcome news in an otherwise hostile market place. First Direct’s original stance made at the start of April was reflective of a cautious attitude towards the market as a whole. The reversal of the decision demonstrates a growing confidence in the market.”
The news that First Direct was re-entering the mortgage lending market came shortly after Abbey and Nationwide opted to reduce mortgage rates. At the same time, mortgage lender, HSBC announced that it was extending its rate matcher offer.
This could come as a relief to UK borrowers who for the past few weeks have been hit by the mortgage crunch.
According to Moneysupermarket.com’s Credit Crunch Monitor indicates that the cost of the average best two-year fixed rate deal from the top providers rising slightly last week, by 0.03% to 6.26%.
By: Mildred Parker
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Monday, February 15th, 2010 at
6:43 am
First Direct withdrew from the market six weeks ago as it struggled to cope with soaring demand for its mortgages.
However, this Monday, the mortgage lender returned to the market, resuming offering a wide range of mortgages to its customers.
First direct was forced to withdraw from the market on April 1st when it suspended its offers to people without existing accounts at the bank.
However, it has now cleared a backlog of mortgage application approvals and is returning to the market.
It said at that time demand had surged after rivals raised their mortgage rates or withdrew offers due to the credit crunch.
Its 2-year fixed rate of 4.95 percent had been one of the best on offer to homeowners which consequently caused a stampede on the bank which it could not cope with. It said at that time demand had surged after rivals raised their mortgage rates or withdrew offers due to the credit crunch.
The bank usually takes a small portion of the mortgage market and struggled to cope as it received a years worth of mortgage applications in three months. It said at that time demand had surged after rivals raised their mortgage rates or withdrew offers due to the credit crunch.
First Directs usual 3.6 per cent share of the mortgage market has increased substantially due to the competitive offer, which requires a 20% deposit. However, this Monday, the mortgage lender returned to the market, resuming offering a wide range of mortgages to its customers.
By: Carys Robshaw
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