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

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 - First Direct won Moneyfacts Best Bank Mortgage Provider Award in 2023. 

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
Unlimited overpayments won't incur an early repayment charge as long as you don't repay the mortgage in full Free standard mortgage valuations Often among the lowest interest rates on the market and the option to choose fee-free products at slightly higher interest rates Offset mortgages available on an interest-only basis	Not available through brokers, so may not be presented as one of the options if you go through an intermediary 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 First Direct doesn't offer longer-term fixed-rate mortgages of more than 5 years, unlike some of its rivals

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. 

There is no minimum earnings requirement for a standard repayment mortgage, but for an offset mortgage on your own, you must have a salary of at least £50,000 per year, and 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 4.70%
• Standard 5-year fixed rate at 75% LTV at 4.49%
• Life tracker at 60% LTV at 6.09%

After the introductory period, fixed-rate deals will revert to the lender's standard variable rate, which is currently 6.99%. You can use our Mortgage Rate Comparison Tool to find the best mortgage deals available across many different lenders.

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?

First Direct has two main fees 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 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 a 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?

First Direct uses Experian, Equifax or TransUnion when somebody applies for a mortgage, it 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 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 find useful information in our article, "The best way to check your credit score for free".

Does First Direct offer mortgages to people with bad credit?

First Direct uses a credit scoring system based on the information it receives from credit reference agencies. This system involves applicants being awarded points for demonstrating good financial habits in the past (for example, making payments on time and 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 scores 4.3 out of 5 stars based on the opinions of over 24,000 reviewers on the independent customer review site Trustpilot. With 69% of respondents categorising the company as "excellent". It's worth noting that these reviews are based on the company as a whole rather than the mortgage proposition specifically. Indeed, according to the consumer site Which?, First Direct mortgages ranked third out of 21 mortgage lenders. This was based on assessments of customer service, value for money and transparency of charges, among other criteria.

 

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