Tesco Bank has added home loans to its range of financial products, from next week customers will be able to choose between a selection of fixed-rate and tracker mortgages.
A range of two, three and five-year fixed rate deals as well as a two-year base rate tracker will be on offer. The lowest rate is 3.19% on their two year fixed deal with a 30% deposit (70% loan to value).
There are, however, better mortgage deals available on the market their rates are relatively competitive. For anyone able to provide a deposit of 40% or more there are currently a number of fixed rates deals available at 2.95% and 2.99% from Natwest, HSBC and Santander.
But Tesco is also hoping to attract customers with its other product features such as the option to make overpayments of up to 20% during the initial rate period without an early repayment charge. This is quite a unique offer as many other lenders cap overpayments at 10%.
It will also offer the option to apply for up to two repayment holidays per year. Customers will also be able to earn Tesco Clubcard points at a rate of 1 point per £4 spent on repayments.
Alternative brands continue to challenge high street banks
Tesco Bank’s launch into the mortgage market is the latest move by alternative financial service providers to take on the mainstream banks. Marks and Spencer recently launched the first M&S Bank in Marble Arch and the retailer will be opening more in-store branches throughout the next two years.
As well as continuing to offer their range of credit cards, loans and insurance they have will also launch a current account in autumn and mortgages at a later date. This follows Asda’s expansion into the money space last month, with its launch car, travel and home insurance products, currency exchange and a flagship cashback credit card.
Against a background of banking scandals and technical glitches over the past couple of months, there is some evidence that the public are moving away from the big high street banks. In July, Which? reported that mutual building societies and small banking institutions have seen significant increases in the number of people switching as part of a banking backlash.
Which? welcomes new competition in the market
Peter Vicary Smith, chief executive of Which? said: ‘We welcome more competition to give consumers greater choice and drive up the quality of customer services and products available.
‘We will be looking at the detail of Tesco Bank Mortgages in our product testing and look forward to more lenders entering the market with competitive rates as this will help households who are struggling with rising bills.’