First Direct re-enters the mortgage market

First Direct, the bank that spooked the mortgage market by ceasing all new home lending seven weeks ago, is to reopen its doors. The bank, a subsidiary of HSBC, said yesterday that it had processed a backlog of applications for its mortgages and was ready to begin accepting new business once again. First Direct sparked panic among mortgage brokers and borrowers when it announced on 1 April that it would stop doing business with new customers.

The move followed an unprecedented number of mortgage applications from borrowers attracted to the bank's interest rates, which looked unusually generous in a market where other lenders had been withdrawing deals. After First Direct's announcement, the pace at which lenders cut back on advances accelerated significantly, with a string of banks and building societies raising interest rates and fees or the deposits required to secure a mortgage.

Chris Pilling, the chief exec-utive of First Direct, said the bank now felt able to reopen for business and that it had "honoured the fixed interest rates available when people first contacted us about their mortgage".

The deals now available from First Direct are more expensive than its previous offerings and require a minimum deposit of 20 per cent. But the move is another sign that a logjam in the mortgage market is easing slightly. Halifax said yesterday that it was cutting the cost of new fixed-rate deals for customers coming to the end of existing special offers from the bank, by an average of 0.15 percentage points.