by Mark Johnston
Tesco Bank Enters the Price War.
Rates have really come down in the last few months as banks and building societies have begun to slash their rates.
Tesco Bank first launched its range of mortgages in August 2012 in a bid to capture a larger slice of the UK retail banking market. They recently announced that they intend to lend £1 billion by the end of 2013.
Therefore it seems that they too have stepped in to the mortgage price war by slashing loan rates.
The supermarket backed lender has recently unveiled a 2 year fixed rate deal at 2.28 per cent with a loan to value (LTV) of up to 60 per cent. They have also launched a 5 year fixed rate deal at a rate of 2.89 per cent with a maximum loan to value (LTV) of 70 per cent. Both of these deals have a product fee of £1,300 and also a banking fee of £195.
Rachel Springall, finance expert at comparison website, moneyfact.co.uk, said “Tesco’s 5 year 2.89 per cent deal is a very competitive entry which offers a market leading rate in the 70 per cent loan to value sector”.
London and Country associate director of mortgages, David Hollingworth, added “it is a good rate and is one of the lowest in the market but borrowers have to factor in the fee”.
For those borrowers with just a 20 per cent deposit the bank has launched a 5 year fix with a rate of 3.79 per cent product, which is a cut of 0.60 per cent.
David McCreadie, managing director of banking for Tesco bank, said of these deals “these products combine competitive rates and fees and also underline our commitment to meeting the financial services needs of Tesco customers”.
However, Jane King, principal of London based Ash-Ridge private finance, suggested that “Tesco bank fees have come down but they are still very middle of the road and other lenders provide better incentives”.
Craig Taggart, head of mortgages for London based Baigrie Davies Limited, also commented that the rates were ‘relatively competitive’.
Tesco currently only offer their mortgages through its own telephoney team or via the online Tesco bank website.
However, it has been suggested that since Tesco is not a huge force in the financial service sector yet the only way to market penetration is to either substantially increase their product range or sell their products through intermediaries at least in the short to medium term.
Ray Boulger, senior technical manager at John Charcol, recently suggested that “Tesco bank will be forced to offer its range of mortgages through brokers if it is to meet its own targets”.
Other industry experts agree with Mr. Boulger and also added that unless the bank is able to offer cutting edge rates all the time then the lending targets they have set for themselves are not going to happen.
Coreco director, Andrew Montlake, finally added “I still remain concerned that with the market in such a state of flux, another lender offering a non-advised mortgage process in not ultimately in the best interest of a majority of borrowers”.
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