TESCO Bank has stopped offering mortgages and is looking for ways to sell the loans of its 23,000 customers due to “challenging market conditions”.
The lender has offered mortgages since 2012 and its homeowners currently owe a total of £3.7billion.
PA:Press Association Tesco Bank has withdrawn its mortgages due to “challenging market conditions”
As recently as January, Tesco Bank slashed rates across all of its remortgage and new borrower deals by up to 0.31 per cent.
Experts say today’s news is a blow to home buyers as Tesco Bank has offered “extremely competitive rates”. Luckily for existing customers, they won’t be affected for now.
A spokesperson for the bank told The Sun it cannot give a timeline on the potential sale as it’s still in its “early stages”.
But they stressed that if a sale does go ahead, the lender will tell customers of any impact it will have on their accounts.
Yet homeowners shouldn’t worry as their mortgage rates will stay the same for the length of the deal, even if the loans are sold to another lender.
How to get the best mortgage dealONCE you’ve got your deposit together, you can start looking for a mortgage deal.Websites like Moneysupermarket and Moneyfacts have mortgage sections so you can compare costs and all the banks and building societies have their offers available on their sites too.
If you’re getting confused by all the deals on the market, it might be worth you speaking to a mortgage broker, who will help find the best mortgage for you.
A broker will typically cost between £300 and £400 but could help you save thousands over the course of your mortgage.
You can also get advice from a digital mortgage broker for free, like Habito or Trussle.
Money.co.uk have a list of top mortgage brokers that specilise in the specifics to suit your needs.
You’ll also have to decide on if you want a fixed-deal where the interest your charged is the same for the length of the deal or a variable mortgage, where the amount you pay can change depending on the Bank of England Base Rate.
And David Hollingworth from London and Country Mortgages warned buyers not just to be swayed by the headline rate and to take into account product fees, which can typically be around £1,000.
He said: “It’s always important to shop around and have options.”
“Paying a higher rate interest rate could still work out as better overall value than paying a chunky arrangement fees.”
David Hollingworth, mortgage expert at London and Country Mortgages, told The Sun: “It’s certainly a shock to see Tesco withdraw from the market and it’s bad news to lose such a well known brand that has offered some extremely competitive rates to borrowers in its time.
“However, existing borrowers should not panic. The terms of their mortgage deal will continue exactly as laid out in the original mortgage offer, both now and in the event of the mortgages being sold on.”
“Borrowers should carry on making payments as normal confident that the terms of their deal will not be affected.
“Of course they should still be ensuring that they have noted the end of any deal period, such as a fixed rate, so they can review their options.
“Shopping around the rest of the market a few months before the end of any deal period will help them avoid slipping onto a higher variable at the end of the current deal.”
Meanwhile, Andrew Montlake, director of mortgage broker Coreco, said: “With transaction levels painfully low, the mortgage market has never been as competitive as it is right now.
“Diminished margins against a backdrop of extreme political and economic uncertainty have resulted in Tesco calling it a day.
“It’s a small blow to consumer choice but thankfully there are lenders aplenty that are financially strong and keen to get money into the market.”
Gerry Mallon, chief executive of Tesco Bank, said: “In recent years, challenging market conditions have limited profitable growth opportunities.
“We have therefore chosen to cease lending to new customers and announce our intention to explore a sale of our portfolio.
“Our priority in any sale, is to complete a commercially acceptable transaction with a purchaser who will continue to serve our customers well.”
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Earlier this year, around 290,000 Tesco Bank current account customers saw the interest they earn on their current accounts slashed.
Last year, the lender was fined £16.4million for failing to protect customers during cyber attack.
Meanwhile, new rules are going to make it easier to get the cheapest home loan deal.
Tesco set to ‘axe 15,000 jobs and close fish, meat and deli counters in massive shop floor cull’
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