Yahoo Finance Tesco Poised To Enter Mortgage Market
Tesco Bank is to start offering mortgage deals from Monday.
Some of its deals aim to attract those who regularly shop at Tesco (LSE: TSCO.L - news) , as shoppers with Tesco Clubcards will receive a point for every £4 on their monthly mortgage repayments.
It also plans to launch cash Isas before the next tax year starts, as well as current accounts to coincide with changes next year to make switching easier, giving customers a "complete package" of products.
Tesco will offer mortgages to people with deposits of 20% or more, but declined to give a figure for the amount it plans to lend or the number of customers it hopes to attract, saying its immediate plans are "modest".
The product range includes two, three and five-year fixed-rate mortgages, and a two-year base rate tracker.
A spokeswoman for the bank, which already offers insurance, credit cards and savings products, said that building the mortgage business would be a "long-term project".
She (SNP: ^SHEY - news) said: "Tesco Bank's aspirations are modest in the short-term and will grow as the product range is extended and the bank establishes itself in the mortgage market."
Rachel Springall, spokeswoman for comparison website Moneyfacts, said Tesco was the first supermarket to launch mortgages into the market, when the Co-operative Bank, which has been in the financial services sector for 140 years, is not included.
She said: "Tesco Bank's two-year fixed mortgage at 70% loan-to-value at 3.19% will be the joint market leader with Nationwide Building Society, by rate for deposits of 30%.
"As the only supermarket to bring forward a range of mortgages, it will be interesting to see whether new supermarket lenders bring out a range of their own in the attempt to compete with the high street banks."
The jump into the mortgage market comes at a tough time for mortgage lending generally as figures from the British Bankers' Association showed that approvals slumped to their lowest number in at least 15 years in June.
Lenders have been tightening their borrowing criteria and people with low deposits are expected to have a particularly tough time finding a deal in the coming months.
Tesco Bank, which has 6.5 million customers, was launched in 1997 as a joint venture between supermarket giant Tesco and Royal Bank of Scotland (LSE: RBS.L - news) .
Tesco acquired the remaining 50% RBS stake in 2008 for £950m and the bank is now fully owned by Tesco.
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