First Direct closes mortgages to new customersAnd other banks have raised variable rates

02 April 2008

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First Direct has announced that it's withdrawing its mortgage range from new customers, while two other lenders have raised their rates for existing ones.

Internet and telephone bank First Direct said it was temporarily withdrawing its range from 5pm yesterday after receiving five times the usual volume of applications in recent weeks.

At the same time, NatWest and Royal Bank of Scotland and Kent Reliance Building Society became the first lenders this year to raise their variable mortgage rates for existing customers.

Unprecedented demand

First Direct, which prides itself on high levels of customer service, said the 'unprecedented' level of business it was receiving meant it was taking longer to process applications than it would like.

It added that it had decided to withdraw its range from people who were not already customers until it had cleared the backlog, rather than raise its rates in a bid to discourage borrowers.

The group will continue to offer mortgages to existing customers, even if they do not currently have their home loan with it.

NatWest and RBS

Meanwhile, NatWest and Royal Bank of Scotland, which are part of the same group, announced they were increasing the rate on their variable rate offset mortgage from 6.2% to 6.45% from tomorrow.

Kent Reliance Building Society also today raised its standard variable rate for both new and existing customers by 0.25% to 7.59%.

A raft of lenders including giants such as Nationwide Building Society and Cheltenham & Gloucester, have increased their mortgage rates for new borrowers in recent days due to the ongoing high costs of funding as a result of the credit crunch.

Standard Life

But the latest move is thought to be the first time lenders have raised rates for existing borrowers since last year.

Standard Life Bank has also announced that it is increasing its mortgage rates for new borrowers for the second time in two weeks.

The group, which did not pass on February's interest rate cut, is hiking its fixed rate mortgages by up to 0.49%, while its tracker rates are being increased by 0.4%.

But the Co-operative Bank bucked the trend, reducing the interest charged on its five and 10-year fixed rates by 0.3%.

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