What Tesco’s exit from mortgages means for you


Having previously announced their mortgage exit, Tesco Bank has now sold its mortgage portfolio for £3.8bn to Halifax, part of Lloyds Banking Group, the UK’s biggest lender.

The supermarket chain has been in the mortgage market for over seven years, while Halifax will take on more than 23,000 borrowers who owe a total of £3.7bn on their homes.

Why Tesco's exiting mortgages

Tesco Bank chief executive Gary Mallon said the move was about "ensuring that our offer remains sustainable in the long-term", while he blamed "challenging market conditions" on the move to exit the market back in May. Communications on the bank’s website said it wants to focus on "our everyday banking business".

To put things plainly, it’s generally agreed that Tesco Bank decided to leave the market because of the mortgage price war, which could have eaten into its profits.

Another factor mentioned in the press was coming to terms with ring-fencing rules introduced at the start of the year, which meant lenders had to separate their retail operations from investment banking units.

Dilpreet Bhagrath, Mortgage Expert at Trussle, says that several factors have made things difficult for Tesco.

“As Tesco's criteria was quite strict compared to other lenders, borrowers with adverse credit or unusual circumstances often looked elsewhere. Coupled with tighter regulations in the mortgage market, and the growing popularity of app-based banks, Tesco has lost its foothold in the mortgage market.

Tesco Bank has a small proportion of the market, and while the loss of any lender reduces consumer choice, there’s unlikely to be much of an effect on the range of deals available, she says.

The impact on Tesco customers

If you’ve got a mortgage with Tesco, your rate and terms will stay the same. And if you’ve just had a mortgage application approved, the terms will be honoured by first Tesco, then Halifax.

Tesco Bank is expected to transfer customers over to Halifax by the end of September, with the full transfer being completed in March 2020.

As a result, Tesco said you can still get in touch to request changes until September 27. This could be for term amendments, product transfers, additional borrowing, porting, and payment holidays.

If your fixed or tracker period ends shortly, Tesco will write to you confirming your options, though Halifax will get in touch if this happens after the transfer has taken place.

Tesco also pledged to contact customers on a Standard Variable Rate (SVR) should there be any changes.

Clubcard points

One of the selling points with Tesco Bank was you could register your Tesco Clubcard to your mortgage account and earn one point for every £4 you repaid every month.

This process will continue happening until September 27, after which Tesco has pledged to “gift” Clubcard points when the book transfers over to Halifax “to say thanks”.

How many points you get depends on how long a period you’ve got left on your fixed or tracker mortgage – you will effectively earn points based on what you would have earned by the end of the term.

If you’re on an SVR you’ll be given one year’s worth of Clubcard points based on your monthly payments. Meanwhile, for those with a mixture of fixed and tracker, points will be based on when they both end.

You’ll see Clubcard points appear on your quarterly Clubcard statement in November 2019, or in February 2020 if you’re still going through the application process after September 27.

What Trussle’s doing to help

If we helped you get a mortgage with Tesco, or you’ve had one approved through us, we’ll be in touch to answer your questions.

We’ll also explain that if you’re on a fixed-rate mortgage it will still be honoured if Tesco’s mortgage portfolio is sold, but the new owner might have a different Standard Variable Rate (SVR).

However, it may still be worth remortgaging rather than waiting for the transfer period, so you can lock on to the most competitive fixed-rate and tracker mortgages available.

What to do if your lender sells your mortgage

There’s no need to worry about your lender selling its mortgage book. In fact, lenders exiting the market is much more common than you think. Some people even forget who their current mortgage lender is.

The terms of your loan are protected by law, so they won’t change once the transfer takes place.

In Halifax, Tesco has sold to an active and established lender which will act professionally, whether you want to stay with Lloyds Banking Group or remortgage to another lender when the time suits you.

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