Tesco Bank, part of the retailing giant that carries the same name has announced that it is to begin offering mortgages for the first time in the UK. Its foray into the mortgage world is likely to be as timid as an injured athlete returning to training for the first time. Conservative lending will be the order of the day.
The bank, which said it aimed to offer products for the “majority” of its supermarket customers is not going to be offering any mortgages to those with deposits less than 20%, in other words, 80% maximum loan-to-values. This will rule out much of the first time buyer market, where lower deposits tend to be the norm.
“This is a prudent place to start,” said David McCreadie, managing director of Tesco Bank. He acknowledged that Tesco bank currently had no plans to offer mortgages to first-time buyers with smaller deposits, even though he expressed confidence that Tesco Bank is planning a full service that would rival high street banks.
The range of mortgages include two-year, three-year and five-year fixed rates. Mortgage experts in the UK have questioned the Tesco Bank offers and claim they are so uncompetitive, it is unlikely that many consumers would ever end up taking the Tesco Bank loans out.
The entry of Tesco Bank into hard-core lending is likely to continue to be done on a step-by-step basis as the grocery giant learns the complexities and dangers associated with lending. However, it’s entry into the mortgage market should be an interesting exercise that is likely to closely watched by similar operators such as Sainsburys, who also promote their own ‘bank’ services.
Here in Ireland, it is probably safe to say that we are stuck with banks that we already have. With just two lenders, AIB and Bank of Ireland doing minimal levels of lending, other banks continue to lick their wounds on the banking sidelines. A return to mortgage lending is a while away, even if the property market begins to stage a meaningful recovery.