The subsidiary of HSBC says the move will allow it to deal with the unprecedented number of applications it has received in recent weeks.
First Direct will continue offering mortgages to existing customers, regardless of whether they have a mortgage with the bank. It will resume offering mortgages to non customers when the backlog has been cleared.
Chief executive Chris Pilling has stressed the move has nothing to do with lack of funding.
He says: “We’ve seen unprecedented demand for our mortgages since January thanks to our highly competitive pricing and the decision of other lenders to raise rates. As a result, we’re currently seeing applications running at five times our normal volumes.
“The flood of interest 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.”