Tesco to offer mortgages?

Tuesday, 21 July 2009 08:52

Tesco is looking at strengthening its personal finance operations in a bid to offer more mainstream banking.

Tesco Personal Finance already offers insurance, savings, loans and credit cards via stores and online to over five million customers and this year it is trialling in-store banks - offering current accounts in 30 branches across the country.

The supermarket could now aim at launching a standalone bank which could raise funds for mortgage lending directly from the wholesale markets.

In order for Tesco to do this it would need a separate credit rating for its personal finance division, which the firm is said to be mulling.

In an interview with the Financial Times, Andrew Higginson, chief executive of Tesco's retailing services business, stated the supermarket was looking at building a sizable mortgage book.

He added, the first current accounts could be 18 months off and mortgages could come six months later.

Funding could also come from the supermarkets savings business.

Savings balances at Tesco Personal Finance have increased firmly since the financial crisis - rising from £2.5 billion in October to over £4.5 billion by the end of February.

This has been made possible as the supermarket has been able to main higher savings rates.

Earlier this year, there were warnings a move into high street banking from Tesco would hit smaller local building societies.

• Tags:
• first time buyer mortgage
,
• news