Mortgage lender First Direct has temporarily stopped offering mortgages to non-customers in order to process the unprecedented number of applications it has had in recent weeks.
The lender will still allow existing customers to apply for and will resume offering mortgages to non-customers as soon as the backlog of applications has been dealt with. In the interim, HSBC - the bank's parent lender - will offer new customers a two-year fixed-rate mortgage on similar terms to First Direct's best-buy mortgage.
Chris Pilling, chief executive of First Direct, 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're currently seeing applications running at five times our normal volumes.
"The flood of interest in our mortgages has meant we're taking longer than we'd like to handle applications, especially from non-customers. 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.
Some mortgage lenders may have failed to comply with the Financial Services Authority's (FSA) conduct of business rules surrounding mortgage arrears, according to the FSA.
The FSA's mortgage conduct of business rules are designed to encourage mortgage lenders and brokers to set business standards for various aspects of their relationships with customers. The second part of the FSA's Effectiveness Review investigated the effectiveness of the rules in the sub-prime and lifetime mortgage markets.
The FSA's research into how mortgage arrears were handled, indicated that not all lenders and/or brokers, were in compliance with the conduct of business rules that apply to mortgage arrears.
Richard Farr, director of the Association of Mortgage Intermediaries, said he was disappointed that the FSA has found areas of non-compliance by firms with the arrears rules.
He said: "We are calling for all lenders to invest in their arrears management process, and consider involving the original intermediary. In times of financial crisis, we believe it is important for lenders and intermediaries to work together to help borrowers.""
