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Thursday, 23 October 2014

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Every little helps your mortgage?

Tesco moved into the mortgage market this month as it looks to further expand its empire. The banking arm of the supermarket colossus – the largest supermarket bank in the UK – is now offering four mortgage products from fixed-rate to tracker deals.

A 20 per cent deposit is required and repayment interest rates have been pitched at between 3.19 per cent and 5.09 per cent.

Some mortgage commentators have remarked that this is still more expensive than the three per cent deals still to be found on the High Street.

But handily for regular Tesco shoppers, Clubcard holders can also accrue points towards their shopping bills. They’ll get a point for every £4 of monthly mortgage repayments made. With the average monthly mortgage payment put at around £759, it equates to collecting 189 points a month on average.

And with confidence and cynicism towards the banking sector unlikely to recover anytime soon, has the new entry by TescoBank into the mortgage market won over consumers?

One shopper at Carlisle’s Tesco said her mortgage was with the taxpayer-rescued Northern Rock and she was unhappy. She said customer service levels were now poor, making it harder to deal with issues so a Tesco option would be preferred.

Dad-of-one Chris Lynch, 29, of London Road, Carlisle, said: “I get my car insurance and pet insurance through Tesco so I would, absolutely.

“I personally find it a lot easier it all going through the one company. The banks tend to take advantage in selling mortgages so Tesco would make it a lot more competitive.

“It’s the same with the supermarkets. The more of them there are in an area, the more competitive the prices.”

Sisters Kirsten and Samantha Hornsby, of Greystone Road, Carlisle, were not entirely convinced.

Kirsten, 20, said: “I’m not so sure. I’m probably more likely to go to a bank than Tesco. It would make deals more competitive though.”

Samantha, 23, added: “I’d go to a bank. I probably wouldn’t think of going to Tesco for a mortgage. Getting your mortgage from a supermarket just seems a bit random.”

Liz Thompson, of Little Corby, no longer requires a mortgage but said she was more inclined to stick with specialists like the Cumberland Building Society.

“No, I don’t think I would go to Tesco for a mortgage,” she said. “They are a big company trying something new but they haven’t done it before.”

Albert Hill, 75, of Durranhill, Carlisle, said he could see why the Tesco plan would work but advised housebuyers to shop around. “Trust has gone down a lot in the banks,” said Mr Hill. “I’d sound Tesco out but I’d go around a few places before making up my mind.”

Philippa Green, visiting family in Silloth, was right behind the idea. She said: “I’ve got my pet insurance with Tesco and they are not likely to go bust as they’re such a massive company. I’m about to get a mortgage in the next six months and would have automatically gone to Lloyds, but if Tesco were offering one I’d see what the rates were like.”

The Tesco Bank mortgage product range includes two, three and five-year fixed rate mortgages, and a two-year base rate tracker.

Rates start at 3.19 per cent (two year fixed, maximum LTV of 70 pre cent) and Tesco Bank offers mortgages up to a maximum of 80 per cent LTV. All products will move onto the Tesco Bank standard variable rate at the end of the initial fixed or tracker rate period (currently 4.24 per cent). There is a flat booking fee of £195 on all products and customers can choose between a £0 or £800 product fee option to suit their needs. Early repayment charges apply during the initial rate period.

Tesco Bank has 6.5 million accounts and policies. It opened in 1997 and since 2008 has been owned by Tesco PLC.

For the year ending February 2012, Tesco Bank made a baseline profit of £203m - up 29 per cent from the year before.

Visit www.tescobank.com for more information.

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