Money Insider: Tesco's modest mortgage debut shows promise
Saturday 11 August 2012
On Monday, Tesco Bank extended its suite of financial services products as it launched its first range of residential mortgages.
The foray into mortgages has been delayed on a number of occasions, but with technical glitches causing some of its high street banking rivals huge issues in terms of reputational damage and financial cost, it's understandable that Tesco wanted to be sure it was absolutely ready and had a solid infrastructure in place.
The products, available online or by telephone but not through brokers, comprise fixed-rate deals for two, three and five years plus a two-year tracker. Flexible features include the ability to make overpayments of up to 20 per cent of the outstanding balance each year, double that allowed by many lenders.
Some commentators were quick to stick the knife in, claiming Tesco's rates were uncompetitive and the range too limited.
I'll be the first to agree that the rates aren't chart toppers and you can find better deals out there. For example Tesco's two-year fixed rate with no fee is priced at 3.59 per cent whereas the best buy from Barclays is 3.29 per cent.
However if you're launching into the UK mortgage market from scratch, and not buying up a back book from another lender, as some rivals have done, you need to take a sensible approach to pricing to ensure you're not inundated with applications for best buy deals from day one which leads to you struggling to provide a satisfactory level of service.
Over the past few years Tesco Bank has become a formidable player in the credit card and personal loans space, where it is frequently among the top three in terms of competitiveness.
So even though the initial mortgage rates may be a little off the pace, as the business develops I expect to see lower-priced deals start to emerge if Tesco wants to seriously challenge some of the more established mortgage lenders.
The fixed-rate fix
In this environment of low interest rates, many savers are still looking to earn the highest possible return on their savings.
One sure-fire way to bag a better rate is to lock your money away in a fixed-rate bond rather than an everyday easy access account.
The trade-off is that for a better return you lose access to your cash – or at least that's the theory.
The latest research from Moneynet shows a different picture and highlights that many of the biggest financial providers on our high streets offer a poor deal to savers, particularly those looking for a one-year fixed-rate account.
The newer and less-established financial providers tend to offer the same interest rate regardless of the amount involved, so whether you're saving £500 or £50,000 you get the same rate.
But sadly that is rarely the case with the main financial institutions. Rates for amounts below £5,000 are particularly poor and in some instances – with the accounts from Lloyds TSB, HSBC and NatWest you can't open a one-year bond unless you've got at least £2000 to deposit.
While £500 or £1,000 may seem insignificant in the eyes of these banks, surely their customers deserve to have a fixed-rate option even at this level rather than being forced to take their custom elsewhere.
A further issue is that because the main banks still operate a system of tiered interest rates, it's often only those with £25,000 or more to tuck away that receive a better return – yet even at this level some still fall well short of the best buy rates. The returns on these very straightforward accounts can vary quite markedly.
On a balance of £5,000, Barclays, Lloyds TSB and HSBC will pay you 2 per cent AER for a one-year term, compared with 3.45 per cent from Aldermore, 3.4 per cent from Kent Reliance and 3.25 per cent AER from the Post Office and Coventry Building Society.
If banks are serious about encouraging the savings habit and retaining their less-affluent customers, competitive rates should be made available to all, not just those with a five-figure lump sum at their disposal.
Mark Dampier: 'We're on our own in retirement. They've pulled pensions to pieces'
HSBC becomes first bank to offer five-year fixed rate mortgage with interest rate under 2%
Crippling PFI deals leave Britain £222bn in debt
Pension freedoms: How to deal with cold calls from scammers
Barclays new Blue Rewards hands cash to customers. What’s the catch?
- 1 Rarest Beanie Baby of them all could be sold for £62,500 on eBay
- 3 Driving while dehydrated can be just as dangerous as drink driving, study suggests
- 4 Farmer told to tear down mock-Tudor castle after hiding construction behind hay bales
- 5 One Direction: Louis Tomlinson launching his own record label, has already 'signed two acts'
If I’m being racially abused I don’t need a stranger with a saviour complex to rescue me
The only black face in the Ukip manifesto is on the page about overseas aid
Ukip is the only main political party to not address LGBT rights in its manifesto
Food banks: One million Britons will soon be using them, according to Trussell Trust
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
iJobs Money & Business
£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...
£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...
£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...
Day In a Page
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000