First Direct reopens its doors to 'non-customers'

First Direct has started offering mortgages again to people who don't already have an account with the online and telephone bank.

It had called a halt to new home loans for "non-customers" on 1 April, after receiving five times its normal number of applications.

At the time, the bank said that it had taken the step so it could clear a backlog of mortgage applications and retain service standards.

"Last month, we took the bold decision to withdraw from mortgage sales to non- customers to allow us to process the huge number of enquiries we had received," said Chris Pilling, First Direct's chief executive. "We have now assessed all the loan applications outstanding from 1 April and earlier, and let everyone know the outcome."

First Direct was not the only lender to have found itself in this position. Several small building societies were swamped by people wanting to remortgage and, as a result, some took the same line as First Direct in only lending to customers who already held an account with them.

The backdrop to these shifts in policy is the continuing credit crunch, which is making it hard for lenders to raise money through the international money markets. This in turn means they have had to limit the number of new loans, as well as raising interest rates on many of their deals.