Bread Milk and a Mortgage Please

by Mark Johnston

Tesco’s is looking to diversify their banking portfolio even more and offer mortgages at competitive rates and, they say that they want to be “the sort of bank we all used to love”.  While we all know that the banks are under significant reform and reprimand in some cases, can we really trust a supermarket to supply our specialist mortgage needs.  Further more, will there be a day where the supermarket is too bit to fail and we’re asked to dig deep to bail out our local 24 hour store?

Late April saw the banks loose their struggle over the mis-selling of payment protection insurance (PPI).  The High Court case that challenged the new Financial Service Authority (FSA) rules on PPI complaint handling was lost and the high street banks, like HSBC, Barclays and Lloyds et al, are expected to face a £4.5 billion compensation bill.  At the current count, 9 out of 10 complaints on PPI are settled in favor of the customer.  Is this the last straw for many customers, will the supermarkets do a better job, time will tell but we’ve provided some of the highlights below to allow you to make a somewhat informed choice. 

Lloyds Banking Group and Santander are the two most complained about banks in the market today, a complaints report from the Financial Ombudsman Service revealed recently.  Many are looking towards Tesco, the leading supermarket in Britain at the moment, for a viable alternative option.  In late April, word from the Tesco group was that they would be offering mortgages this summer and that they will be taking the fight to the major banks.  They have a certain reputation in the supermarket industry and they most certainly have the capital to match some of the bigger banking groups. 

Philip Clarke, the group’s new chief executive said that “Tesco Bank has the opportunity to be the sort of bank we all used to love”.  He went on to say that he hoped that Tesco Bank would be “the sort of bank you can trust and did a good job for you”.  A strong statement and very good selling point when you stack that up against the success they have achieved within their supermarket business.

Bigger banks are worried about this most recent move by the chaps on the corner who I buy my milk and bread from.  The first step by the supermarkets into the financial arena was taken over ten years ago and while they don’t offer current accounts at the moment, they do offer various types of financial products including insurance and savings products like ISA’s.

MoneyFacts’ Michelle Slade has recently come out and said that “The supermarkets have really shaken up the market, offering some of the best deals, particularly when it comes to personal loans and credit cards,” Lloyds and Santander, the least liked institutes as far as recorded complaints, should be very worried that their customers will defect to the supermarkets for a change.

Customers will vote with their feet and if the supermarkets can offer top notch products along side good customer service and the big banks have realized this but is it too late for some of them to do anything about it.  In our next report we will review the viable alternative options.



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