First Direct has temporarily stopped offering any of its mortgages to people who are not already its customers.

The bank, which is part of HSBC, said the withdrawal was to allow it to cope with the unprecedented demand for its range of mortgages.

Many providers have withdrawn mortgages or raised interest rates this year, leaving some smaller banks and building societies unable to cope with demand.

First Direct says applications have been five times usual levels.

Historic highs

"The flood of interest in our mortgages has meant we're taking longer than we'd like to handle applications, especially from non-customers," said First Direct chief executive Chris Pilling.

"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."

As a result of the credit crisis, the interest rates at which banks lend money to each other are unusually far above the Bank of England's base lending rate.

That has made it uneconomic for some institutions to carry on offering mortgages and thousands of products have been withdrawn already this year.

First Direct is the first major lender to withdraw its entire range to non-customers, although the Bath and Earl Shilton building societies took the same step last month.

(BBC)

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