Tesco Bank's move into the mortgage market was long awaited, but its launch in August was something of a damp squib.
To be fair, expectations were extremely high of the new lender, possibly too high. Many wondered if it would take the supermarket's stack 'em high, sell 'em cheap approach to the mortgage market - giving the major lenders something to worry about.
In fact, the lender launched products that were decidedly average – a range of decent enough deals with decent enough rates, but no best buys and a loyalty scheme that offered borrowers a pretty measly number of Tesco Clubcard points for every pound they repaid on their homeloan.
Still, the positives were - and still are - that Tesco's launch range is simple and straightforward and has good flexible features, like the ability to overpay up to 20% of the mortgage each year – twice that allowed by most lenders.
Why so underwhelming?
Most mortgage pundits surmised that the lender purposely came out with a range that wouldn't attract too much attention, so it could test its systems and processes in the real market.
Tesco also happened to launch in the middle of a mortgage rate war, when three large lenders all launched sub-3% headline-grabbing mortgages. So even though the new lender's products weren't expensive, they looked it compared to some of the super-low rates they were up against.
However, it has only taken a matter of weeks for Tesco to do something about it.
Jonathan Harris, director of mortgage broker Anderson Harris, says: "Tesco's decision to cut its mortgage rates so soon after launch suggests that it wasn't getting the levels of business that it had hoped for. This is not a surprise as its rates were priced uncompetitively: they weren't bad, but were far from market-leading."
Every little helps
Now the lender has slashed rates across its range by up to 0.5 percentage points, taking some of its deals towards the top of the best buy tables.
For example, borrowers with a 30% deposit can now get Tesco's two-year fixed rate at 2.99% (chopped from 3.19%), or a three-year fix at 3.28% (a cut of 0.41%). If you want lock in for longer the lender's new five-year fix is 3.39% – a massive cut of 0.5% from the launch rate.
Finally, the new two-year tracker rate is now 2.95%. All mortgages come with a reasonable (by today's standards) fee of £995.
If you don't have a 30% deposit, the lender also has more expensive rates available to those with a slightly smaller deposit of 25%, and another tier for those with 20% upfront.
Those with less than a 20% deposit or equity will need to find a different lender, as Tesco offers no mortgages for borrowers with small deposits – usually first-time buyers.
Can they be beaten?
The new cheaper deals catapult Tesco into best buy territory.
The two-year fix of 2.99% is up there with the lowest rates, but it can just be beaten by Yorkshire Building Society, with a deal at 2.84% with the same £995 fee.
The five-year fixed rate is also a real contender. It can be pipped on rate by HSBC, but only by 0.10 percentage points (3.29%), though the bank also charges a cheaper fee at £499.
NatWest has the cheapest five-year fixed rate on the market at 2.95%, but the arrangement fee is a massive £2,495.
It's worth pointing out that both the NatWest and HSBC deals require a 40% deposit whereas Tesco only demands 30% upfront – so it will be accessible to more borrowers.
The two-year tracker is also a best buy for those with 30% upfront, but if you can muster a larger deposit of 35% or 40% there are a handful of cheaper rates on offer.
As you can see, Tesco Bank is now offering some very competitive mortgage products, but Harris points out that there are some things borrowers should be aware of.
"While the new range is improved, it is possible to find cheaper rates elsewhere on some products. However the five-year fix pegged at 3.39% is the market-leading rate for a borrower with a 30% deposit and the fee is not extortionate for a 'best buy'. It is also a shame that if you have less than a 20% deposit, there are no options available to you."
How do you get one?
You can't pick up a Tesco mortgage with your weekly shop and Tesco doesn't have bank branches on the high street. If you want one you will have to go online or call up the lender and arrange your deal over the phone.
An important point to note is that the lender doesn't distribute its mortgage products through brokers, so you can only get the deal by going directly to the lender. Since Tesco Bank doesn't offer mortgage advice that means you must take out the product on an information-only basis - where you must decide what deal best suits your needs.
That's fine if you are very confident about your financial knowledge and you know what you want. But what if you aren't sure?
Harris says: "You can't get any advice or speak to someone face-to-face: it's all over the phone or online, which will put some people off. If you have complicated income streams, an unusual property or need advice you may be better off speaking to an independent mortgage broker to find the most suitable deal for you."