Tesco Bank has today pulled its entire range of mortgage products and announced intends to sell its existing home loans to a different provider.
This news will certainly spark concern one of the retailer’s 23,000 mortgage customers, who collectively borrow a whopping lb3.7bn.
Here, we explain why Tesco is pulling out of the mortgage market and provide advice on what the future holds for homeowners with a Tesco Bank mortgage.
Why has Tesco withdrawn from the mortgage market?
Tesco has offered mortgages since 2012, but that’s arrived at an abrupt halt today.
Tesco’s decision to prevent mortgage lending may come as an unexpected, considering that as recently as February it had been launching new mortgages with cashback incentives as it sought to ‘remain among the most competitive providers’.
Not anymore. The retailer has today asserted ‘challenging market conditions’ have limited its growth opportunities, meaning it needs to take out of offering mortgage loans permanently.
In a statement, Tesco Bank’s CEO Gary Mallon said: ‘We have made the strategic decision to focus on serving a broader range of customers in additional specific areas, which means leaving our mortgage offer.
‘We've therefore chosen to cease lending to new customers and announce our intention to explore a sale of our portfolio.’
What to complete if you have a mortgage with Tesco
Tesco states that it wants to sell its mortgage book to a provider who ‘continues to serve our customers well’, but has stressed that there’s no guarantee of a successful sale.
The lender states that existing customers will be informed as and when sales is completed, as well as in the meantime, borrowers don’t be concerned or take any action, as their mortgage loans will continue on the terms originally agreed.
Existing Tesco Bank mortgage customers can contact the lender on 0345 051 8461 if they have questions.
Remortgaging from Tesco Bank
If you’ve currently got a mortgage loan with Tesco Bank and you’re either approaching the end of your fixed term or already on the lender’s standard variable rate (SVR), now could be time to remortgage to a better deal elsewhere.
And don’t worry if you’ve still got some months to go 'till the end of your introductory deal period, as with many cases it’s easy to agree a new mortgage 6 months prior to the end of the fixed term.
The good news is the fact that right now, home loan rates are attractive across all loan-to-value (LTV) levels, using the average two-year fixed rate at 2.49%, and the average five-year fix at 2.86%.
Tesco Bank: a loss of revenue for first-time buyers?
While today’s news primarily affects Tesco’s existing customers, it could also be not so good news for prospective borrowers – especially first-time buyers.
When we explored the cashback market last week, we discovered that Tesco was among the only providers to provide lb1,000 cashback to first-time buyers taking out a home loan at 90% or 95% loan-to-value.
In truth, cashback continues to be the largest attraction of the Tesco mortgage for a while, as while the supermarket’s deals were competitive, they weren’t chart-topping when it came to rates.
Based on Moneyfacts data from last week, Tesco two-year fixed rates at 90% and 95% LTV were both around 0.25% more expensive than the market-leading rate.
Get expert consultancy in your mortgage
If you've got a Tesco Bank mortgage and wish suggestions about your options, or else you would like to remortgage to obtain a rate plan, it can help to speak to an expert.
A whole-of-market large financial company can make a specialist recommendation on the best option for you.