Mortgage lender closes mortgage door

Britain's lender crisis has deepened as one of the leading banks in the country has called a moratorium on mortgage lending to new borrowers.

First Direct announced it was stopping all new lending after its comparatively favourable lending rates attracted a large number of new would-be borrowers.

The move comes as mortgage rates have stayed high despite two recent Bank of England base rate cuts, due to the high interbank lending rates which have persisted due to the low levels of confidence experienced in the wake of the credit crunch.

First Direct, a subsidiary of HSBC, said it will resume issuing the product in due course once matters settle down.

However, the event may be a further indication of the severity of the liquidity crisis, which has seen mortgage lending fall by 40 per cent between November 2006 and February this year, according to the latest Bank of England statistics.

Commenting on these figures, Royal Institution of Chartered Surveyors senior economist Simon Rubinsohn predicted the figure will "slip further over the coming months".

Those seeking a new home may decide to avoid the mortgage market by opting for self build.


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