First of the Big Banks pull Mortgages

Writes Dan Drage dan.drage@consumerchoices.co.uk

First Direct, the internet banking arm of HSBC, called a halt to new mortgage lending yesterday as the global credit crunch took a firm stranglehold on the UK housing market.

Upon receiving five times the usual number of mortgage applications this week, First Direct (www.firstdirect.com) has taken the unprecedented decision to withdraw its mortgage products from the market for new customers.

Chris Piling, Chief Executive at First Direct, suggests the move is a temporary measure:

‘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.’

High street lenders Nationwide (www.nationwide.co.uk) and Cheltenham & Gloucester (www.cheltglos.co.uk) took the approach Mr. Piling was keen to avoid, and raised their mortgage rates to uncompetitive levels.

"We’ve decided to withdraw temporarily from offering mortgages to non-customers until we’ve cleared the backlog"

Natwest (www.natwest.com) and the Royal Bank of Scotland (www.rbs.co.uk) are preparing to raise their variable mortgage rates for new and existing customers.

Small building societies have already been forced to withdraw mortgage products due to an unmanageable demand. The Bath building society and the Earl Shilton financial house have withdrawn their entire range of mortgage products, with the exception of those at their standard variable rates.

Three others, Newbury, Melton Mowbray and the Tipton and Coseley, are lending to local applicants only.

Chris Eagle, Commercial Manager at Credit Choices, anticipates a flat housing market in 2008:

‘These moves, designed to deter potential mortgage applicants from borrowing money, will significantly decrease the number of people looking to buy houses. House prices will fall as a result, and the market looks set to be flat for at least the next 18 months.’

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First of the Big Banks pull Mortgages

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