Tesco Bank to launch mortgage deals
Filed under: Mortgages
The supermarket giant 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.
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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, which will be available from Monday, includes two, three and five-year fixed-rate mortgages, and a two-year base rate tracker. Rates will start at 3.19%, for a two-year fixed-rate mortgage with a minimum 30% deposit, which includes an £800 product fee. A non-refundable booking fee of £195 also comes with the deals.
Someone paying £750 a month on their mortgage would receive Clubcard points worth £22 over a year which could be converted into rewards worth £88, although Tesco emphasised that its primary aim was to offer competitive rates and the Clubcard points were an added "thank you". 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".
Rachel Springall, spokeswoman for comparison website Moneyfacts, said that 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 (LTV) 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."
David McCreadie, banking managing director at Tesco Bank, said the 80% LTV rate was an appropriate starting point for a "responsible" lender and it would keep an open mind about introducing mortgages with lower deposits.
All of the mortgages would allow customers to make regular or lump sum overpayments of up to 20% of the outstanding balance each year during the initial rate period, without incurring an early repayment charge.
© 2012 Press Association