Tesco Bank stops selling mortgages and seeks exit
Challenging market conditions mean it will sell on its existing portfolio of loans in a move affecting 23,000 customers.
Tuesday 21 May 2019 16:47, UK
Tesco Bank is getting out of the mortgage market - blaming "challenging market conditions".
The lender said on Tuesday it had stopped new mortgage lending and was actively pursuing a sale of its existing portfolio, which has total lending balances of £3.7bn.
Its announcement came as Nationwide, Britain's biggest building society and a rival in the mortgage market, reported a fall in annual profits partly due to fierce competition for home loans.
Tesco Bank currently has more than 23,000 mortgage customers who are currently able to collect Clubcard points when repaying their loans.
Chief executive Gerry Mallon said the lender would ensure fair treatment as he sought to justify the shift.
He wrote: "In recent years, challenging market conditions have limited profitable growth opportunities.
"Our focus is on how we best serve Tesco customers and align our resources effectively to their needs while ensuring that our offer remains sustainable in the long term.
"To that end, we have made the strategic decision to focus on serving a broader range of customers in more specific areas, which means moving away from our mortgage offer.
"We have therefore chosen to cease lending to new customers and announce our intention to explore a sale of our portfolio.
"Our priority in any sale, is to complete a commercially acceptable transaction with a purchaser who will continue to serve our customers well."
Tesco Bank, which first started offering home loans in 2012, has not been immune from pressure across the sector.
A sluggish housing market and low interest rates have helped spark a race to the bottom in mortgages amid strong competition for business between high street lenders - a fight that has taken its toll on profitability over the past year.
Tesco said existing mortgage customers did not need to take any action as there were no changes to their accounts.
It added that should a sale of the mortgage portfolio be secured, it would contact them directly to explain what the sale would mean.
Meanwhile, Nationwide reported a 15% fall in pre-tax profits to £833 for the year to 4 April, partly thanks to a £227m charge for technology asset write-offs and its IT investment programme.
It was also partly due to "sustained market competition" for mortgages hitting profit margins.