Tesco makes entry into mortagage market

Tesco is making an entry into the mortgage market with the launch next week of a range of deals, even as a home loans price war break out on the high street.

Starting 6 August, Tesco Bank, promoted by the world's third-largest supermarket chain, would be offering a selection of fixed-rate and base-rate tracker mortgages to homebuyers and those remortgaging, but according to a broker the rates were not bad but they were not market leading either.

However, the lowest fixed rates ever in the UK are on offer from some of its rivals launched just days ahead and analysts say, this would make things rather difficult for Tesco's latest foray.

Earlier this week NatWest launched a five-year fixed-rate at 2.95 per cent – putting itself just ahead of HSBC and Santander, which offer five-year loans at 2.99 per cent and by way of contrast,the cheapest Tesco five-year loan is 3.89 per cent, but to be fair to Tesco its fees are a lot lower, and those sub -3 per cent deals are only open to people borrowing a maximum of 60 per cent of the  property value.

Tesco would be banking on its vast customer base and marketing clout, coupled with the falling popularity of the big banks, which puts it in a strong position to take a decent share of the market. However, some are wondering why it decided to launch its deals when half the country ws away on holiday and the other half was glued to the Olympics.

Though extra competition in the mortgage sector would be good for all, some first-time buyers might feel there was not much for them, as all the Tesco deals required a deposit of at least 20 per cent.