by Mark Johnston
Tesco Bank goes After Best Buy Status.
Tesco bank is a telephone and internet based commercial bank, though it does currently have two store based branches in Coventry and Worthing.
Tesco bank was founded in 1997 and was originally a joint venture between Tesco and the Royal Bank of Scotland (RBS), until Tesco bought out its banking partner in 2009 months after the RBS was rescued by the British tax payer at a cost of £45.5 billion.
In 2012 the supermarket group Tesco started offering mortgages via its Tesco bank. However, the rates they originally offered were very uncompetitve.
Benny Higgins, chief executive of Tesco bank and a former head of retail banking at the Royal Bank of Scotland (RBS), believes “senior managers need to do more to ensure customers are better served by lenders”.
The bank suggest that they aim to be the financial services provider of choice for Tesco customers by providing great value, good service and rewarding loyalty.
Mortgage rates have been falling for some time due to the funding for lending scheme, which gives lenders access to cheap finance as long as they increase lending.
Therefore, the bank has launched three new fixed rate mortgage products.
The new fixed rate products are a two year mortgage at 1.74 per cent, a three year product at 2.29 per cent and a five year fix at 2.49 per cent.
All three of these products are available for buyers with a 40 per cent deposit and charge a £1,300 product fee and a £195 non-refundable booking fee.
John Cotton, of London and Country mortgage brokers, said “Tesco are definitely going after best buy status with these deals”.
The two year rate by the lender is a current market leader matched only by Chelsea building society’s two year direct only deal, which also has a rate of 1.74 per cent for up to 60 per loan to value (LTV) but it does come with a higher fee of £1,695.
Tesco bank has recently also expanded it mortgage range to include 85 per cent loan to value (LTV) fixed rate and tracker products.
Rates start at 3.29 per cent for a two year fixed rate mortgage and 3.25 per cent for a two year tracker.
The lender is also to cut rates on its tracker mortgages. The a two year tracker mortgage up to 80 per cent loan to value (LTV) will come with a rate of 2.25 per cent over the bank of England base rate, with an £800 product fee.
There is however an option of a rate of 2.75 per cent with a product fee of just £195, though both products come with a non-refundable booking fee of £195.
David McCreadie, managing director of banking at Tesco bank, says “the new fixed rate and tracker products we have announced provide outstanding value to customers. We aim to provide customers with a combination of strong rates and competitive fees”.
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