Tesco Bank exits mortgage market: what customers need to know
Tesco Bank has become the latest lender to pull out of the mortgage market this year, following the likes of AA Mortgages, Magellan and buy-to-let specialists Secure Trust Bank.
The move will not immediately impact Tesco’s 23,000 mortgage customers, although this could change if and when Tesco sells its existing loan book.
Tesco made it clear in its announcement this morning that “there is no certainty” that any sale will take place and that it was exploring its options.
Until then, it’s business as usual for existing customers with rates and repayments staying the same.
Product transfers, porting and further advances also continue as normal.
Borrowers in the process of applying must have reached an “offer in principle” and paid product fees by midnight on 24 May. Offers will be made by 14 June and completed within six months.
Nick Morrey, of mortgage adviser John Charcol, says Tesco has been “very reasonable” with its terms.
“When Magellan shut its door permanently, it announced that it would honour any applications that had offers released but everything else was being returned to the brokers (they had no direct applications – it was all through intermediaries).
“This was not what brokers or consumers wanted to see. Tesco are doing things differently.
“We can’t ask for more to be honest and I applaud Tesco for their stance here.”
Should existing customers be worried?
As things stand, if you’re a Tesco Bank mortgage customer there’s no reason to worry as nothing has changed from your point of view.
However, if and when Tesco sells its existing loans to another lender, then you may have reason to raise concerns.
If the loans are sold, the new lender or administrator will honour all completed mortgages under the original terms.
But problems could arise if during the term of the mortgage you need further borrowing or you move house.
Morrey says: “Your mortgage may be passed to an administrative institution with no appetite for new lending and as such you may not be able to get any further borrowing.
“Such companies are under no obligation to offer product transfer rates for when you come off your rate either, which means you could be stuck on their standard variable rate, which is often relatively high.
“If your circumstances are such that you cannot remortgage away then you could find yourself a ‘new mortgage prisoner’.”
But for now, these are all “maybes” as no sale has been confirmed.