HSBC subsidiary First Direct has withdrawn the offer of mortgages to non-customers, further fuelling the crisis in the lending industry.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Meanwhile a study carried out by the MoneyFacts website revealed that 90 mortgage products per day have been withdrawn in the past week, leading to an eight percent decrease in the available offers to borrowers.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.’
Got a Question? Ask.
Ask the community a question about this article:
Frequently Asked Questions
Starting a networking group
By: sarahinaustin | 27-08-2008
I am starting a networking group in Austin, TX. We want to collect dues in order to cover our expenses like running our website, subsidizing our meals, creating business cards, etc. I have no idea we will need to pay taxes. This is a not for profit organization. No one is going to be on paid. Do I need a DBA? I would appreciate any guidance. Thank you.
How can i check the status of a claim i made with ...
By: superdog | 27-08-2008
how can i check the status of a claim i made with the ftc regarding wrong information i saw on my credit report?
Hi I am getting behind on my credit card payments ...
By: Maureen | 27-08-2008
Hi I am getting behind on my credit card payments because of high interest I wanted some info about that
Is Mobile Banking useful for the ...
By: arllyn | 27-08-2008
Is Mobile Banking useful for the customers?
If self occupied house property sold after 3 year, is it taxable ?
By: Nilesh | 27-08-2008
If self occupied house property sold after 3 year, is it taxable ?
Southern California Ford Regional Complaint Center
By: Tim Williams | 26-08-2008
Need the address for the Southern California Ford Complaint Center. Have a problem with a dealership and over charges and want to present to Ford regional Center for ajudication.
Q&A Powered by:
Latest Mortgage Articles
Mortgage Lenders Products Available Hit New Low
By: Chris Borthwick | 13/10/2008
The number of mortgage products available from mortgage lenders has hit a new low. Search around – good deals are available from mortgage lenders.
Why Fha Refinance Options are so Popular
By: Frank Collins | 12/10/2008
A second option for refinancing occurs when a borrower who has an existing loan, which is not an FHA mortgage, can still receive refinancing by doing a rate and term refinance whereby they are not getting any cash back or consolidating debt. The loan amount maximum is even better at ninety-seven percent.
How to Find a Solution to Stop Foreclosure Sale
By: Jill Borash | 12/10/2008
Find the perfect solution for your unique situation to stop foreclosure sale.
Why Everyone Really Ought to Know About the Principles of Agency and Contract
By: John Donaldson | 12/10/2008
Principles of contract and agency - the what? Yes, boring, perhaps, but if you're selling or buying property in the United Kingdom then you need to understand this.
Home Mortgage Refinancing : Decision You Should Make
By: Julian Lim | 11/10/2008
Are you having second thoughts about getting a home mortgage refinancing program? The fact is that mortgage refinancing can be a helpful financial tool especially if you feel you need to restructure your debts or are having problems with repayments of your existing mortgage loan.
Top 3 Ways Mortgage Brokers Can Stay on Top of Their Game
By: Lina Smith | 11/10/2008
It’s no secret that our place in the current real estate market is at a steady decline. Refinances are proving to be more difficult to obtain due to stricter lender policies. The purchasing and selling of properties is stagnant because although it is a buyer’s market; buyers taking the bait are few and far between. As a society, we’ve hit rock bottom. The good news is that there is no other way to go from here except for up. Real estate professionals such as mortgage brokers can use this do
Three Common Misconceptions of Mortgage Brokers
By: Lina Smith | 11/10/2008
Some first time home buyers opt to obtain a loan directly through their local bank branch rather than employing a mortgage broker. The reason why this may occur is because there a few misconceptions associated with the mortgage broker profession. In reality, mortgage brokers and their respective brokerages have come along way from the days of selling loans simply for profit purposes. Listed below are three opposing thoughts on common mortgage broker misconceptions.
Should You Choose a Mortgage Broker or a Lender?
By: Lina Smith | 11/10/2008
So often when you need a loan, you also need somebody who can truly guide you through the process. You are embarking upon a big undertaking and your emotions are already going through way too much. A good mortgage broker recognizes all that is happening for you, and can be the guide that takes you from the beginning of the lending path all the way through to the end. And he is normally the one that can make the process as painless as possible.
More from Mark Skinner
Sub-prime Mortgage Lenders Account for Over Half of UK Repossessions
By: Mark Skinner | 24/05/2008 | Mortgage
Over half of the UK’s repossession orders are being brought by sub-prime lenders, according to a BBC report. These lenders cater for borrowers with poor credit histories and account for only 6% of the total mortgage market.
Secured Loans Rise in Popularity as Credit Crunch
By: Mark Skinner | 24/05/2008 | Loans
The tide is turning for the public perception of secured loans, according to a study carried out by MoneyExpert.com. Traditionally, secured loans were viewed as undesirable due to the necessity of putting up collateral against the loan, which could mean that the borrower lost their property. Now, however, increasingly better rates are making more people re-evaluate the importance of this type of loan.
Motorists Driving in the Eu Advised to Take Out European Car Insurance
By: Mark Skinner | 24/05/2008 | Insurance
Many British motorists driving in Europe are not nearly as well insured as they assume, according to the Association of British Insurers. The majority of UK insurance policies will cover drivers for the minimum legal requirements whilst in EU countries but eventualities such as accidents, breakdown and theft will not be included, leaving holidaymakers out of pocket and facing a ruined trip.
Millions Losing Out Through Remortgage Confusion
By: Mark Skinner | 24/05/2008 | Mortgage
Britons are throwing away millions of pounds a day through ignorance about remortgages, according to a report by Abbey Mortgages. £25 million pounds is being wasted every day because people are paying lenders’ Standard Variable Rates rather than remortgaging their properties. This translates as five million people spending an extra £5 a day.
Many Brits Take Out Personal Loans in Secret
By: Mark Skinner | 24/05/2008 | Loans
Taking out an unsecured personal loan still carries a social stigma, according to a study by Abbey Loans. A large amount of Britons are taking out loans in secret, as they are too ashamed to admit their financial position to friends and family. Over £7 billion is borrowed in secret each year for a variety of purposes. The most common reason is paying off debts (56%) but 15% take out the loan to make home improvements whilst 7% use it for medical bills and 2% for cosmetic surgery.
Loan Leads Firm Introduces Payday Loans as Pawnbrokers Celebrate Profits
By: Mark Skinner | 22/05/2008 | Loans
Top lead exchange company LeadPoint has launched a ‘payday loan’ scheme in the UK following great success with the plan across the Atlantic. The scheme is designed for those on low incomes whose budgets require loans to cover the cost of cheques and other payments. This method could stop households earning between £15,000 and £35,000 per annum from sliding into debt.
Life Insurance Rocketing Up for Smokers
By: Mark Skinner | 22/05/2008 | Insurance
Smokers may be paying as much as £2,000 more in life insurance premiums than non-smokers, according to price comparison website moneysupermarket.com. Following on from last year’s public smoking ban this is another area in which smokers are being specifically targeted. Premiums for non-smokers have slowly fallen in the last few years whereas those for smokers have risen sharply, some estimates claim that smoking policy holders are paying up to 100% more than their non-smoking counterparts.
Hidden Admin Costs Raise Price of Car Insurance
By: Mark Skinner | 22/05/2008 | Insurance
Motorists are being hit by large ‘sneak’ fees for small administrative tasks on their car insurance policies, according to a study by Uswitch.com. 14 million drivers are paying out further costs to their insurers, even when there is no change to the amount of their premiums, simply for minor paperwork changes. The website estimates that this practice earns insurers £330 million per year.
Finance 
