First Direct has resumed offering mortgages to new customers, following its withdrawal from the market last month, due to it being overwhelmed with new business.
The bank, which is part of HSBC, was receiving five times its normal level of applications when it decided to stop offering mortgages to new customers in order to shift the backlog.
Business soared because it is able to offer better rates than its competitors due to its non reliance on the money markets for funding. Rival lenders, meanwhile, who are more dependent on wholesale funding were pulling deals and increasing rates.
But the bad news is that First Direct has increased rates for new customers on its two year fixed rate deal from 4.95 per cent in April to 5.76 per cent.
First Direct chief executive, Chris Pilling, said: “We’ve honoured the fixed rates available when people first contacted us about their mortgage.”
Elsewhere, Katie Tucker of mortgage broker, John Charcol, said: “Fixed rates have been the most competitive for the last two weeks but funding costs have shot up which means that any good rates available now will be gone in a few days, so make your application immediately if you’ve had a quote.
“All mortgage rates are going up. Whilst trackers were competitive, bank rate is now only expected to fall once or twice again this year because inflation is rising worryingly high. The Bank of England has said that it can’t drop bank rates as much as originally expected because of the need to contain inflation.”
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