Tesco Bank makes long-awaited move into mortgages

4 August 2012 | By Paul Thomas

Tesco Bank has made its long-awaited entry into the mortgage market but has no plans to offer its products through intermediaries.

From 6 August it launches a range of two, three and five-year fixed rate mortgages and two-year trackers up to a maximum loan to value of 80 per cent.

Rates start at 3.19 per cent for two-year fixed rate up to 70 per cent LTV, 3.69 per cent for a three-year fixed rate up to 70 per cent LTV and 3.89 per cent for a five year fixed rate up to 70 per cent LTV. Tesco’s two-year tracker starts at base rate plus 2.69 per. The lender offers a product fee-free option, which saves the borrower an £800 fee but makes the rate dearer.

Up to 75 per cent LTV, the lender charges 3.59 per cent for a two-year fixed rate, 3.99 per cent for a three-year fixed rate and 4.19 per cent for a five-year fixed rate, while it charges base rate plus 2.89 per cent for a two-year tracker.

Up to 80 per cent LTV, it charges 3.99 per cent for a two-year fixed rate, 4.39 per cent for a three-year fixed rate and 4.69 per cent for a five-year fixed rate, while it charges base rate plus 3.49 per cent for a two-year tracker.

Customers opting for a tracker mortgage can move to a fixed rate at any time.

Tesco Clubcard holders will collect one point for every £4 they repay on their mortgage each month.

The products are only available online or via the telephone. A spokeswoman confirmed the lender has no current plans to offer its products through intermediaries.

Tesco Bank had originally planned to launch into the mortgage market in the summer of 2011 but its entry was delayed by IT problems.

Tesco Bank chief executive Benny Higgins says: “The launch of Tesco Bank mortgages is a major milestone towards offering Tesco customers a full retail banking service.”

Coreco director Andrew Montlake, says: “I still remain concerned that with the market in such a state of flux, another lender offering a non-advised mortgage process is not ultimately in the best interests of a majority of borrowers.”

In June, Marks & Spencer announced it was gearing up to launch a chain of banks which will include a mortgage offering.

If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat

Readers' comments (12)

Anonymous | 4 Aug 2012 8:12 am
Every little helps!
Unsuitable or offensive? Report this comment
Bill Wells | 4 Aug 2012 9:01 am
Tesco know that there are an awful lot of people who are brainless enough to buy a mortgage based upon the fact that they'll earn points. I can understand why Joe Public has lost confidence in the banks but I can't understand why they would put faith and trust into the company that sells them over-priced groceries. Before anyone tells me that Tesco has cheap bread (which is awful)and other specials, they need to compare Tesco prices with Aldi's.

My question to the FSA is, "should any mortgage provider be allowed to operate unless it can provide advice at the point of sale if required". If a potential client declines advice, that's fine, but it should be available !
Unsuitable or offensive? Report this comment
Anonymous | 4 Aug 2012 9:26 am
its strange at at time when the FSA want to ban non-advised sales that Tesco are launching this propostion. its going to get even tougher for brokers as the multi million pound marketing budget will ensure tesco can compete with the big boys
Unsuitable or offensive? Report this comment
Chris Gardner | 4 Aug 2012 10:51 am
Does anyone know if these new "banks" ie M&S and Tesco, are just white labelled operations, or are they proper free standing new entrants?
Unsuitable or offensive? Report this comment
AJK | 4 Aug 2012 1:20 pm
Well done Tescos
So the way I see it is that the FSA are keen to get non advised mortgages sold to the general public. It seems the very target market this is aimed at should seek mortgage advice not picking the latest tin of cheap mortgages on offer off the shelf- Well I guess the FSA knows best- NOT!
Unsuitable or offensive? Report this comment
NJH | 6 Aug 2012 9:33 am
I would be concerned with this offering, purely in that having online and phone application routes only Tesco would potentially open themselves up to some kind risk as regards mortgage fraud. At least experienced brokers (advised) have the benefit of meeting applicants face to face and being able to more easily (hopefully) spot potential problems earlier - and of course protect the consumer, who may be rosy eyed towards buying a property when they cannot really afford it. But, in todays world with more and more cost cutting to get the cheapest bottom line and drum up business potential problems will become normality.
Unsuitable or offensive? Report this comment
Dazed & Confused | 6 Aug 2012 9:36 am
I read this and it really makes me wonder what my 20 years complaint free experience in the industry, my FPC, my CeMap and my AFPC actually count for when our beloved regulator grants a supermarket the OK to offer non advised sales?

I would like to think that our trade body might get up off its backside and actually do something POSITIVE for once, but I guess that is just a bit too much to hope for!

Imagine Tesco's offering conveyancing off the shelf...I just wonder how long before the Solicitors would be screaming "foul"??

Hey ho!
Unsuitable or offensive? Report this comment
Anonymous | 6 Aug 2012 12:11 pm
its is incredible that the regulator has allowed the biggest financial commitment one can take on to be sold alongside a packet of crumpets.

as brokers we speak to clients day in and day out and there is a different set of circumstances for each client. how on earth can non advised sales still be justfied at a time when the rest of the industry is being tightened up at all levels.
Unsuitable or offensive? Report this comment
the sceptical one | 6 Aug 2012 12:36 pm
i have it on good authority that m&s products, including its bank account, will be provided by hsbc
Unsuitable or offensive? Report this comment
Bob Riach Riach Independent Financial Advisers | 6 Aug 2012 1:09 pm
They say their UK based team can give you information about Tesco Bank Mortgages, but they don't offer advice
They should not be allowed to offer mortgages unless they can provide advice at the point of sale.
Their mortgage website looks very much like the Nationwide Building Society Website
It seems that it’s the power of the supermarkets again.
Will they have to declare the Tesco points in the KFI?
I took Tesco to task a few years ago for their online protection insurance and that they didn’t inform the applicants that it was a reviewable premium. It was only mentioned in the small print. What was their response? We aren’t providing advice and they continued doing it.
Lets see how long they stay in the market place before they get complaints

Get a Tesco mortgage and receive a free bag of potatoes
Unsuitable or offensive? Report this comment