Tesco Bank launches its first ever range of mortgages next week.
Tesco Bank will unveil a range of mortgages for all homeowners from first-time buyers through to those with up to 30 per cent equity. The new range of mortgages will be available from the 6th August.
The range will include 2,3 and 5-year fixed rate mortgages as well as a two-year tracker.
Tesco Bank also plans to launch cash Isas before the start of the next tax year on April 6th 2013 and will attempt to muscle in on the UK current account market.
The current account launch will coincide with changes in the current account market which will make it easier for customers to switch.
Its two-year fixed rate deal charges an interest rate of 3.19 per cent for those with a loan-to-value (LTV) ratio of 70 per cent, rising to 3.99 per cent for those with an 80 per cent LTV.
Its three-year fixed rate product rate is 3.69 per cent rising to 4.39 per cent for the same LTV ratios.
If you opt for a five-year fix, the rate goes from 3.89 for those borrowing 70 per cent of the value of the property, up to 3.99 per cent for homeowners borrowing 75 per cent and 4.39 per cent for those with just 20 per cent equity.
The two-year tracker charges interest of 2.69 per cent plus the Bank of England base rate (currently 0.50 per cent) for borrowers with a 70 per cent LTV. The rate goes up to 2.89 per cent plus base rate for 75 per cent borrowers and 3.49 per cent plus base rate for those with 20 per cent equity.
All of its mortgages have the option of paying £800 as a product fee or not paying the fee but being charged a higher rate of interest (between 0.30 per cent and 0.50 per cent depending on the product) and each mortgage has a £195 product fee.
If you opt for a five-year fixed rate mortgage you are likely to be better off paying the fee as the higher interest rate will apply for 60 months.
However, if you opt for a two or three-year deal it may work out cheaper to not pay the fee and pay a higher rate. This depends on how much you borrow and it is sensible to calculate the total cost of both options to see which is most beneficial to your own individual circumstances.
Tesco Bank becomes the first supermarket to launch a mortgage range and consumer groups hope that it could harbor new products from other supermarkets, increasing conpetition and providing benefits for consumers.
Rachel Springall, from Moneyfacts said: "As the only supermarket to bring forward a range of mortgages, it will be interesting to see whether new supermarket lenders bring out a range of their own in the attempt to compete with the high street banks."
Launching the first Tesco Bank mortgage range, Philip Clarke, Chief Executive, Tesco said: "Customers want choice in banking from a brand they know and trust to deal with them fairly. The launch of Tesco Bank mortgages is a major milestone towards offering Tesco customers a full retail banking service."
Andrew Hagger of Moneynet said: "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.”
Mortgage customers will benefit from being able to make lump sum or regular monthly overpayments up to 20 per cent of the value of the loan each year without having to pay an early repayment charge.
Tesco Clubcard holders will benefit further from receiving one point for every £4 paid in mortgage repayments.
Customers can apply for two payment holidays each year and homeowners who are re-mortgaging will not have to pay standard and legal valuation services.
Customers who opt for a tracker mortgage can opt to switch to a fixed rate mortgage if they would like the security of knowing how much they have to pay each month.
Benny Higgins, Chief Executive of Tesco Bank, commented: "Entering the mortgage market is a significant step in broadening the products we offer to Tesco customers. With a focus on serving Tesco customers for the long-term, we will take responsible lending decisions.