Tesco Bank unveils mortgage range

House with coin

Tesco Bank, the retail banking arm of Tesco, has launched a suite of competitive mortgage products.

The retail bank has unveiled a range of two-, three- and five-year fixed-rate mortgages, plus a two-year base rate tracker.

Rates begin at 3.19% for the two-year fix, rising to 3.89% for a five-year fix, which although competitive, is still some way off rival HSBC's lowest-ever five-year fix of 2.99%.

Tesco Bank will lend up to a maximum of 80% loan-to-value, and a flat arrangement fee of £195 applies to all mortgages.

The bank will charge a product fee of either £0 or £800 for each mortgage. Customers who choose to pay the higher product fee benefit from a slightly lower APR over the term of the mortgage.

In addition, Tesco Clubcard holders can collect one point for each £4 on their monthly mortgage repayments.

Philip Clarke, chief executive of Tesco, says the launch marks a "major milestone" towards offering Tesco customers a "full retail banking service".

Andrew Hagger, spokesman for Moneynet, welcomes the bank's entrance onto the mortgage market.

"Consumers should benefit from the extra competition that Tesco Bank will bring to the mortgage sector as it battles for new business with the established high-street lenders," he says.

Hagger adds: "Tesco Bank already has a solid reputation for good value personal finance products, frequently appearing towards the top of the best buy tables in the savings, personal loan and credit card markets.

"The combined mortgage package of competitive rates, flexible product features plus the ability to earn rewards is likely to appeal, particularly to the millions of loyal Tesco Clubcard customers."

Meanwhile, Tesco Bank is mulling over launching current accounts. It is currently running two in-store pilot bank branches, which if successful, could be rolled out across the country.

This article was taken from our sister website, Money Observer.