Tesco Launch Mortgage Products.

by Mark Johnston

                            Tesco launches mortgage products.

Since the financial crisis took hold the government has wanted the stronghold thatBritain’s banks have on personal finances to be broken.

Therefore is now seems that Tesco the supermarket giant is seizing the chance to differentiate itself as a trustworthy brand and the timing could not be better as consumer confidence in banks has plummeted due to recent system glitches and LIBOR rigging scandal.

Supermarket and high street chains have been moving in to the financial sector for some time now and they are already starting to show they can offer finance with a difference.

Experts say that now consumers want a choice in banking and from a brand they know and trust.

Tesco bank has around 6.5 million customers already with credit cards; savings, loans and insurance products and they are therefore hoping its vast customer base and marketing clout will put them in a strong position to take a decent share of the market.

Rachel Springall, spokeswoman for comparison website Moneyfacts, said “Tesco is the first supermarket to launch mortgages in to the market. As the only supermarket to bring forward a range of mortgages, it will be interesting to see whether new lenders bring out a range of their own in the attempt to compete with the high street banks”.

Andrew Montlake, of independent mortgage broker Coreco, added “the additional competition that Tesco will bring to the mortgage market is of course to be welcomed and will hopefully help to keep the big banks on their toes”.

Tesco has initially launched a selection of fixed rate mortgages and two year tracker deals.

Theses mortgages are available to customers at loan to value (LTV) of 70%, 75% and 80%. Tesco bank believes there is little demand for higher loan to value (LTV) products among its customer base and managing director, David McCreadie, said “there is no demand for highLTVmortgage products after conducting research with our customer base prior to the launch of our mortgage ranges”.

The 2 year fixed rate starts at 3.19%, 3 year at 3.69% and 5 year at 3.89% all at 70% loan to value (LTV). Its tracker starts at 2.69%above the Bank of England base rate, again at 70% loan to value (LTV).

There is a booking fee of £195 on all loans; customers can then choose a product fee of £800 in exchange for a lower rate or no product fee with a high rate. They also offer the flexibility to apply for 2 payment holidays a year and the ability to over pay up to 20%.

Also in an extra move to tempt customers borrowers will get one point from the clubcard reward scheme for every £4 on their monthly mortgage repayments.

Analysts at Espirito Santo have pointed out that “tesco has a competitive advantage in being able to use its clubcard data to help assess credit risk”.

However, these deals are not available in stores but on online or by phone.

Ray Boulger, of mortgage broker John Charcol, states “these rates are uncompetitive, any hopes that the entry of Tesco would produce a significant increase in competition have been dashed”.

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