Tesco launches long-awaited mortgage range
Tesco Bank has announced it is to launch its first range of mortgages on Monday (6 August), in a bid to capture a larger slice of the UK retail banking market.
The bank will offer two, three and five-year fixed-rate mortgages and a two-year base rate tracker, injecting much-needed competition into a market dominated by a handful of large banks.
To appeal to existing customers, Tesco clubcard holders will be rewarded with clubcard points as they repay their mortgage, earning one point for every £4 on their monthly mortgage repayments.
Philip Clarke, chief executive of Tesco, said customers disillusioned with traditional high street banks would turn to a brand like Tesco, which they know and trust to deal with them fairly.
He said the mortgage range was also a step towards offering customers a full retail banking service.
Benny Higgins, chief executive of Tesco Bank, said: “With a focus on serving Tesco customers for the long-term, we will take responsible lending decisions and have developed a mortgage business to meet our customers’ needs now and into the future.”
The rates start at 3.19 per cent for a two-year, fixed-rate mortgage with a maximum loan-to-value ration of 70 per cent.
Mortgages are offered at up to 80 per cent LTV. There is a flat booking fee of £195 on all products and customers can choose a product fee option to suit their needs.
Early repayment charges apply during the initial rate period, but all products let customers make penalty-free overpayments of up to 20 per cent each year during the initial rate period.
Customers opting for a tracker mortgage can take advantage of a ‘switch and fix’ facility that allows them to move to a fixed rate if they require greater financial certainty.
Cash-strapped borrowers will be able to apply for two payment holidays a year, while those remortgaging get free standard legal and valuation services.
Tesco’s entry into the mortgage market has been a drawn-out process and fraught with regulatory delays.
In 2010 the group said it expected to offer savings products and mortgages at the beginning of 2011. This date was then delayed to early summer 2011. In June a spokesman for the company said it was in the final stages of setting up mortgage operations.
The bank is also expected to launch current accounts, which it said was a “key part” of its strategy.
Tesco is part of a growing number of new entrants looking to take on the UK retail banking market. Others include Metro Bank, Aldermore and, most recently, M&S Bank.
M&S Bank is to launch this summer and 50 branches will be opened in the next two years. Current accounts will be available by autumn 2012, and mortgages will be offered next year.