Lloyds Bank has agreed a deal to buy Tesco Bank’s mortgage book, in a takeover which will see more than 23,000 residential mortgage customers moved over to Lloyds’ Halifax division.
Tesco Bank first announced it was pulling out of the UK mortgage market in May this year, citing “challenging” market conditions.
The deal is expected to be completed in Spring of next year. Tesco has lending balances totalling £3.7bn and has offered mortgages for seven years. Here’s what the deal means for you.
Why is Tesco Bank no longer offering mortgages?
Regulatory changes introduced following the financial crisis led to much greater competition between lenders to attract new customers, with low rates making it much harder to profit from mortgages. A spokesman for Tesco Bank said: “The market’s changed a lot over the last few years, and we’ve made the decision to stop offering mortgages altogether. Instead, we’re going to focus on our everyday banking business.”
What will happen to my Tesco Bank mortgage?
You won’t see any immediate changes to your mortgages as a result of the takeover, so for example if you’ve got a fixed rate mortgage, your interest rate will remain the same for the remainder of the fixed period.
Similarly, if you’ve got a tracker rate mortgage, your interest rate will continue to move in line with Bank of England base rate changes until your deal finishes.
Customers on Tesco’s Standard Variable Rate (SVR) needn’t take any action either and will be notified of any changes to their rate. However, bear in mind that the SVR is usually much higher than the rate on other types of mortgage, so it’s worth seeing if you can cut the cost of your monthly mortgage payments by remortgaging to a cheaper deal.
What about when my Tesco Bank mortgage deal finishes?
If your deal is due to finish after Tesco Bank’s mortgages have transferred to Halifax, Halifax will contact you and explain your options.
It’s always a good idea to start thinking about what you’ll do next a few months before your current deal ends, as you can usually apply for a new mortgage three to six months before you need it to begin.
Having your next mortgage arranged in advance means you can move from one deal to the next without having to move onto your lender’s Standard Variable Rate.
Tesco Bank mortgage customers to move to Halifax