First Direct Struggle to Keep up With Demand for Mortgage

by Mark Johnston

First Direct, the telephone banking arm of HSBC are struggling to process mortgage applications following the launch of the banks lifetime tracker mortgage.

The telephone bank has seen a massive 40% increase in mortgage enquires and potential borrowers are having to wait up to a month to get an interview so that they can apply. The increase demand followed after the bank announced that it had reduced the application fee to £99 back at the beginning of July 2010.

The bank in seeing a massive demand for the mortgage deal which is a lifetime tracker loan with a rate of 1.79% above base rate throughout the lifetime of the loan so the rate would apply until the mortgage is paid off. Those looking to apply would need at least a 35% deposit as the loan to value (LTV) is 65%. Those with a little less deposit can take advantage of their 75% loan to value (LTV) option at 2.29% above the bank of England base rate which is currently set at 0.5%. First Direct also provide a 85% loan to value (LTV) option at 3.49% for those that are struggling to find larger deposits.

Andrew Hagger of financial product comparison website moneynet said: “When it comes to tracker mortgages First Direct are pretty much number one. The application fee swings it and the fact that there are no exit penalties also helps.”

This is probably the reason why First Direct are being swamped with applications but Rebecca Hirst, a spokeswoman for First Direct, confirmed that customers were having to wait up to a month to get an interview with the bank’s mortgage staff, she said: “We don’t want people to panic about this. We’re sending letters to everyone that has rung up about the mortgages confirming that, providing they qualify, they will get the interest rate they initially called about.”

First Direct have confirmed that they are in the process of recruiting more staff to deal with the unexpected rise in business and have leveraged the fact they they are part of the HSBC group by using HSBC staff to be able to stem the flow and at least stop the waiting time getting any longer.

The Banks spokeswomen went on to say: “We don’t want people to panic about this. We’re sending letters to everyone that has rung up about the mortgages confirming that, providing they qualify, they will get the interest rate they initially called about.”

First Direct could still see even bigger rises in demand following the Bank of Engalds announcement that it is not looking to raise interest rates at present from their record low of 0.5%. Governor Mervyn King said that while the VAT rise planned for the beginning of next year would keep inflation above 2% in 2011, the rate was likely to drop below the 2% target in 2012. This will help reduce pressure for a rise in the base rate.



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