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Part of the HSBC banking group, First Direct has started selling mortgages again to new customers, six weeks after it called a temporary halt.
It stopped offering them on 1 April after being deluged by new applicants as the mortgage drought took hold.
The Halifax meanwhile has become the latest big lender to cut the interest rates on some of its mortgage deals.
It will reduce some offers by 0.15%, but only for existing borrowers seeking to remortgage.
Last week, two of the UK’s biggest mortgage lenders, the Abbey and the Nationwide, made slight cuts to the interest rates on some of their home loans.
Some say these were early signs of a possible easing in the UK mortgage market, which has shrunk dramatically because of the credit crunch affecting the banking system.
The Halifax said “Our price reductions, for existing customers only, are on both our intermediary and branch based ranges,”
“These price reductions reflect a recent, modest, reduction in the still very high cost of Libor related funding.”
Mortgage Backlog
First Direct was the first bank to withdraw its entire mortgage range to avoid being swamped by new business, but it said it could now handle new applications after clearing its backlog.
First Direct’s staff had processed a year’s worth of applications in just three months said chief executive Chris Pilling,
“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,” he said.
“We’ve now assessed all the loan applications outstanding from 1 April and earlier and let everyone know the outcome,” he added.
More recently though, First Direct’s parent group, HSBC, has been taking a big share of the market for new mortgages though its Rate matcher offer.
This has been pitched at people who are trying to move their loans from other lenders, such as the Northern Rock.
It offers to match their expiring fixed rates and, according to the bank, has attracted four times the number of enquiries that it would normally receive.
The deal has been extended to the end of June.
Fewer mortgage transactions
As a result of the credit crunch most lenders have been rationing their lending by withdrawing existing mortgage deals and pushing up the price of the remaining loan packages they have on offer.
Typically, borrowers are now being asked to pay higher interest rates and to put down deposits of at least 10%.
The Bank of England has sought to ease the situation by making billions of pounds available to commercial banks in the form of special loans.
But last Monday there was a warning that the credit crunch and mortgage squeeze were far from over.
The Royal Institution of Chartered Surveyors (Rics) warned that the number of property sales this year might fall by 40% as new borrowers find it impossible to raise the money they need to buy a house or flat.
Prices are widely reported to be falling and industry figures have shown that mortgage lending for house buyers has already fallen to its lowest level for 33 years.
Many people are turning to mortgage brokers for help and advice in securing a mortgage in this market where fewer and fewer deals are available.
In England and Wales asking prices for property rose to a record high in May, despite expectations for a much weaker housing market this year . A survey shows, with house price inflation accelerating.
Property Web site Rightmove said average asking prices rose 2.2 percent on a year ago between April 13 and May 10 to hit an average 242,500 pounds, compared with a 1.3 percent annual rise in the month before.
Prices increased 1.2 percent on the month. The figures are not adjusted to take seasonal factors into account but suggest there is may still be some momentum left in the market as it trends lower.
Economists are predicting falls in house prices of about 10 percent this year and Bank of England policymaker David Blanchflower has warned prices could dive by about a third unless aggressive, immediate action is taken.
However, interest rates are unlikely to come down fast given worries over inflation and, after a decade in which house prices nearly trebled, BoE Governor Mervyn King has indicated a moderation in prices is probably needed.
“Fear and greed” are responsible for the present financial troubles says Hector Sants, chief executive of the FSA.
He also said that “the level of insider dealing is unacceptable” and called for the FSA to have more powers.
Banks and investors have forgotten the golden rule “don’t buy what you don’t understand” added Hants.
He said that the FSA are now “confident that all banks have the right plans in place” and that the credit crunch was moving into a third phase.
He criticised city bonuses, the level of insider dealing in the City and the fact that senior bank bosses did not understand the complex mortgage instruments that they were selling into the market.
For consumers he does not expect the very easy credit times to return for “years”, and suggested that 100 per cent (and more) loans to value ratio mortgages were “unhealthy.”
Nationwide is cutting the cost of some of its fixed-rate mortgages from Friday of this week.
The building society, which is the UK’s third-largest mortgage lender, will be reducing rates on some of its two and five-year fixed-rate deals by up to 0.30%.
In the case of two-year fixes, rates will fall to between 5.95% and 6.55%. This will be dependent on whether the loan is for a house purchase or remortgage and on the fee attached to the loan. Five-year fixed-rates will be reduced from between 5.85% and 5.95%.
The cuts reflect the fact that money market swap rates, which are used to calculate fixed-rate loans, have fallen slightly.
Nationwide’s decision to cut rates is further evidence that competition is returning to the mortgage market, after months during which products have been withdrawn on an almost daily basis and some lenders actively discouraged new customers.
Alliance & Leicester, Abbey and Royal Bank of Scotland have all trimmed rates across a range of products in the past fortnight.
The Nationwide’s rate cuts for house purchases can be summarised as follows: two-year fixed rate (with £599 fee) available from 5.95% (previously 6.10% with £499 fee); two-year fixed rate (no fee) available from 6.35% (previously 6.50%); five-year fixed rate (with £599 fee) available from 5.85% (previously 6.15% with £699 fee).
For remortgages and additional borrowing: two-year fixed rate (with £599 fee) available from 6.15% (previously 6.30% with £499 fee); two-year fixed rate (no fee) available from 6.55% (previously 6.70%) and five-year fixed rate (with £599 fee) available from 5.95% (previously 6.15% with £699 fee).
Maximum loan-to-value is 90% for new borrowers, 95% for existing Nationwide customers.
