The circumstances that led to First Direct withdrawing its mortgage lending
After getting literally hit by a flood of applications for its fixed rate mortgage deals, First Direct decided to withdraw mortgage lending from its bouquet of services for its new customers.
The surge in applications was owing to the increased interest from people in their mortgage deals in response to the actions of its competitor banks. Not being able to cope with these unprecedented circumstances, the firm was left with no option but to withdraw its mortgage offers. According to the Chief Executive Chris Pilling, it was becoming operationally unfeasible to deal with the large number of applications from non-customers. So it decided to stop all of its mortgages to new homeowners instead of increasing interest rates for non-customers on a temporary basis, maybe for a few weeks, to clear off the backlog and function at a desirable pace.
While the operational functioning of First Direct does not rely on wholesale funding as such, it has taken appropriate measures to ascertain that it caters to all levels of applications received. The company intends to offer similar mortgage deals in keeping with the frequent fluctuations in the money market.