Tesco’s bank to offer mortgage products with Clubcard pointsCurrent affairs
Giant supermarket chain Tesco is to launch its mortgage business via its Tesco banks, with their customers able to earn Clubcard points on their repayments.
Starting next week, the supermarket will be offering a selection of fixed-rate and base-rate tracker mortgages to homebuyers and those remortgaging. All of their deals will require at least a 20% deposited and the mainly fixed-rate deals will have a minimum interest rate of 3.19%.
However, Tesco’s new venture is not seen as much of a threat to the existing competition as one broker said that the rates “aren’t bad but they aren’t market leading either”.
Ray Boulger of mortgage brokers John Charcol said: “Any hopes that the entry of Tesco would produce a significant increase in competition have been dashed, at least initially, by its opening rates, which seem to be designed more to avoid getting too much business than to ruffle the feathers of existing lenders.
“Its opening rates would have been competitive a month ago but not now, unless Tesco has re-defined the word ‘competitive’.”
Tesco’s announcement of its new mortgage’s offer follows just days after some of the big lenders introduced long-term fixed rate lower than 3% – the lowest the country has ever seen. NatWest is set to offer a five-year fixed rate at 2.95%, just ahead of HSBC’s five-year loans at 2.99%.
However, the lower interest rates of Tesco’s rivals are only eligible to home-buyers borrowing no more than 60% whereas with Tesco they will be able to borrow up to 70% without any affect in their two years interest rates. The supermarkets’ three-year fixed rate at 3.69% and five-year rate at 3.89% will be made available to customers borrowing more than 70%. In each case, an £800 product fee and a booking fee of £195 will be charged.
The customers with Tesco Clubcards will also receive a point for every £4 on their monthly mortgage repayments. An individual paying £750 a month on a mortgage would receive £22 worth of points on their Clubcard in over a year which could be converted into rewards worth £88.
Housing Minister Grant Shapps welcomed Tesco into the mortgage market stating variety of lending options were important towards helping people to own a home.
He said: “I welcome Tesco’s entry into the mortgage market and I hope they will help many more people into home ownership.”