First Direct has announced it is withdrawing its range of mortgages from new customers while two other lenders have raised their rates for existing ones.

The internet and telephone bank, which is part of HSBC, said it is temporarily withdrawing its range after receiving five times the usual volume of applications in recent weeks.

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

First Direct said the "unprecedented" level of business it was receiving meant it is taking longer to process applications than it would like.

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

First Direct chief executive Chris Pilling said: "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."

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

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

Kent Reliance Building Society also raised its standard variable rate for both new and existing customers by 0.25% to 7.59%, while Standard Life Bank announced that it is increasing its mortgage rates for new borrowers for the second time in two weeks.

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.

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

Copyright © PA Business 2008

www.firstdirect.com/ (First Direct)