First Direct mortgage review: does it offer the best mortgages?

14 min Read Published: 24 Nov 2021

First Direct mortgages review What is First Direct mortgages?

First Direct, a subsidiary of HSBC, was set up in 1989 as a telephone and online-only bank. Since then it has attracted 1.5 million customers with its current accounts, mortgages, loans, credit cards, savings and investments. Part of its appeal is the 24/7 nature of its business and the fact it was a trailblazer in moving banking off the high street and instead having an online presence. 

In terms of mortgages, it stands apart from many of its competitors by not dealing with brokers and only offering mortgages direct to customers. This means you may not routinely be shown First Direct mortgage deals in shortlists provided by an intermediary. That is not to say it doesn’t stack up in terms of competitive deals: it has been a player in the recent mortgage price war, cutting rates to all-time lows. 

First Direct Key Features

  • Only offers mortgages direct to customers - doesn't deal with intermediaries
  • Fixed and tracker-rate repayment and offset mortgages
  • Allows unlimited overpayments without an early repayment charge
  • Competitive interest rates

First Direct Pros and Cons

Pros Cons
tick Capacity to overpay without incurring an early repayment charge

tick Free standard mortgage valuations

tick Often among the lowest interest rates on the market and the option to choose fee-free products at slightly higher interest rates

tick Offset mortgages available on an interest-only basis

cross Not available through brokers, so may not be presented as one of the options if you go through an intermediary

cross You are unlikely to be approved for a mortgage if you have a County Court Judgement or any other significant black marks on your credit file

cross First Direct doesn't offer longer-term fixed-rate mortgages of more than 5 years, unlike some of its rivals

cross As it is online or over the phone-only, there isn't the option to speak to someone face-to-face about your mortgage

What types of mortgages does First Direct offer?

First Direct has two main categories of mortgages: repayment mortgages and interest-only offset mortgages. For the former, borrowers pay off the capital and interest, while for the latter you balance any existing savings you have against the mortgage, only paying the interest on the remaining amount. As you don’t pay back any of the capital, you have to demonstrate a strategy for being able to repay that debt at the end of the mortgage term. 

With the repayment mortgage option, there is the choice of fixed rate, tracker or standard variable rate mortgage deals. These are available for first-time buyers, movers or those looking to remortgage. 

How much can I borrow with First Direct?

First Direct has an online mortgage calculator, which gives you an idea of how much you can borrow. Quite simply, you state whether you are the sole applicant or whether it is a joint application and then add the relevant salary information, after which it shows you a rough maximum figure you may be able to borrow. This equates to around 4.75 times your annual salary, for both sole and joint mortgages. 

It is important to note that the figure shown is an estimate. The amount may vary depending on factors such as the loan-to-value of the loan and any additional income or existing financial commitments. This is because, since the Mortgage Market Review in 2014, lenders have to assess the affordability of the loans they offer, taking into consideration other financial commitments, as well as whether the borrower would be able to make the monthly repayments if interest rates rose significantly. 

If you are applying for a mortgage on your own, you must have a salary of at least £50,000 per year. For joint applications, either one party must have a minimum salary of £50,000 or both applicants have a combined salary of £75,000.

What interest rates does First Direct charge?

As mortgage rates change frequently, it is a good idea to look at First Direct's table of mortgage rates at the time you are planning to make your application. At the time of writing, these deals were available across the First Direct mortgage range:

  • Standard 2-year fixed rate at 60% LTV at 1.24%
  • Standard 5-year fixed rate at 75% LTV at 1.59%
  • Life tracker at 60% LTV at 2.19%
  • 2-year fixed offset at 60% LTV at 2.69%

After the introductory period, fixed rate deals will revert to the lender's standard variable rate, which is currently 3.54%.

How long does it take to get a mortgage offer from First Direct?

You can apply for a mortgage with First Direct either online or on the phone. If you begin the application online, you will have to arrange a time to have a call, during which time the customer service person will take the required information from you and, all being well, issue an agreement in principle. Following that, you will have a further call with a qualified mortgage adviser, who will select the best mortgage product from the range and arrange a mortgage valuation. It can take up to two weeks for this valuation to happen and for the mortgage to be approved. 

What fees does First Direct charge for its mortgages?

There are two main fees levelled by First Direct for its mortgages: a booking fee and an arrangement fee. A booking fee, if payable, is required at the beginning of the application process to lock in a particular rate or deal. An arrangement fee, meanwhile, is paid after the mortgage application has been processed. The product range is divided into mortgages that have a fee attached to them but have a lower headline mortgage rate, or deals where there is no fee but the interest rate is a few base points higher.

The charges are:

  • A booking fee is payable on some fixed rate mortgages and can be up to £490
  • An arrangement fee is payable on some tracker mortgages and is also up to £490

First Direct offers free standard valuations, although it is also recommended that buyers also pay an additional amount to have a more thorough survey to uncover any potential problems with the property. There is a list of the fees charged by First Direct for carrying out this work, or you have the option of employing an independent surveyor.

Can you make overpayments on your First Direct mortgage?

Unlike most other lenders, First Direct allows unlimited overpayments - either as lump sum or regular overpayments - without incurring any sort of penalty. It is only if you pay off the full balance of your fixed-rate mortgage within the introductory period that you will have to pay an early repayment charge. In that case, the charge is 3% of the original mortgage balance in the first year, or 2% in subsequent years

Offset mortgage borrowers are encouraged to put as much in the savings pot linked to their mortgage as possible to reduce the amount of interest payable on the mortgage. This also doesn't incur any sort of penalty. 

What is the maximum mortgage term with First Direct?

In line with a lot of mainstream lenders, First Direct allows borrowers to extend their mortgage term to as much as 40 years on its repayment mortgages. Meanwhile, on its range of offset mortgages, the maximum term is 25 years and the borrower must be able to demonstrate how he or she plans to pay off the capital at the end of that period.

What credit reference agency does First Direct use?

When somebody applies for a mortgage, the prospective lender will run a check on their credit file to assess how much of a risk they pose based on that person's credit history. If the applicant has a less-than-perfect credit report, it could mean they get turned down for the loan or, alternatively, they may only be able to borrow a smaller amount and/or have to pay a higher rate of interest.

Lenders will use information from one or more of the main credit reference agencies: Experian, Equifax or TransUnion. In the case of First Direct, it uses the credit reports from all three, which means to maximise your chances of being approved, you should check your credit score and report with each one. You can check all three with checkmyfile , although after the initial free trial this incurs a monthly subscription charge. However, you can check each one for free through ClearScore* (Equifax), MSM Credit Monitor*(TransUnion) or direct through Experian.

Does First Direct offer mortgages to people with bad credit?

First Direct uses a credit scoring system based on the information it receives from the credit reference agencies. This system involves applicants being awarded points for demonstrating good financial habits in the past (for example, making payments on time, sticking within an agreed credit limit), while they lose points for past misdemeanours. They will have to reach a certain threshold in order to be approved for a mortgage, so if you have black marks such as County Court Judgements, bankruptcy or defaults on mortgage payments you are likely to be rejected. Similarly, if you have a large number of minor infringements, such as late payments, you may also be turned down.

First Direct mortgage customer reviews

First Direct only scores 1.8 out of 5.0 based on the opinions of over 3,500 reviewers on independent customer review site Trustpilot. With 62% of respondents categorising the company as "bad", the main complaints were poor customer service and issues with using the First Direct app. It's worth noting that these reviews are based on the company as a whole rather than the mortgage proposition specifically. Indeed, according to consumer site Which?, First Direct mortgages ranked joint first out of 16 mortgage lenders. This was based on assessments of customer service, value for money and transparency of charges, among other criteria.

 

 

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