All lenders will ask for a Direct Debit mandate to be filled, as your payments will be made via this method, however you will not start to pay for the mortgage until the cheque has been issed by the bank, so you wont be paying mortgage and rent at the same time, I would however send back the DD, as the lender will not issue the cheque until they have this.
Tarquin, you are fine. Fill in the form so they can set you up for direct debit. You won't start paying until the funds are draw down and are with your solicitor.
Just to add to this question - I've got about 4 loan application forms and they all include Direct Debit Forms. It makes sense that they want this once they offer you a loan but to want this at application stage is a bit weird I think. Is there any good reason for this, other then that they can see which bank you're with?
I think they want as many details from you at application stage as possible so that if you are approved, the rest of the process can go through as quickly as possible. Also, unless you have a current account that you can use to set up direct debits, they may refuse your application.