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Tesco Bank: Little demand for higher LTV products


Tesco Bank says it has no plans to lend above 80 per cent loan-to-value as it believes there is little demand for higher LTV products among its customer base.

In an interview with Money Marketing, Tesco Bank managing director David McCreadie (pictured) says he sees no demand for high LTV mortgage products after conducting research with its customer base prior to the launch of its mortgage range.

The lender launched today with a range of two, three and five-year fixed rates, and a range of two-year trackers, with a maximum LTV of 80 per cent. Tesco Bank planned to launch into the mortgage market in the summer of 2011 but its entry was delayed by IT problems.

McCreadie says: “We have no intentions of launching anything other than what we have in our launch range. That may evolve over time but we have certainly got no firm plans and no dates fixed when we may look to expand any product feature or any customer feature. Our core focus is going to be on the majority of Tesco customers.

“The reality is in the market there was only two per cent of all lending over 95 per cent LTV in the first half of this year so the majority of Tesco customers are not looking for anything in excess of 95 per cent LTV.”

“There are no plans at this stage to do anything above 80 per cent.”

Chadney Bulgin mortgage partner says Jonathan Clarke: “The reason there was only such a small amount of lending in that market is because there are virtually no providers. If there were some more competitive 90 to 95 per cent mortgages available I think they would represent a more significant part of the market. I hope Tesco Bank tires to plug that gap at some point.”

McCreadie says Tesco has no plans to offer its products through brokers, however the lender may be forced to offer an advised service if the FSA implements its proposed ban on non-advised sales as part of the mortgage market review.

McCreadie says: “Clearly, there is the MMR so if there are any implications from that that require a change in operating model we will need to review at that stage.”

Some commentators have accused the launch of being unadventurous as the lender’s rates are not as competitive as some of its rivals.

McCreadie says: “The reality for our rates is that you do not have to have a 40 per cent deposit, you are not paying the highest fees in the market and you do not have to have your main bank relationship with Tesco Bank to access our products.”


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There are 17 comments at the moment, we would love to hear your opinion too.

  1. Anthony Rafferty 6th August 2012 at 5:49 pm

    This makes sense and the rates look good. Well done Tesco and David

  2. The reality is this is total piffle. So you are telling me that your average Tesco client has an LTV less than 80% YOU have no desire to lend at greater than 80% so dont make figures up to suit YOUR strategy. As for the ‘two per cent of all lending over 95 per cent LTV in the first half of this year’ DRIVEL what about the figures between 80%-95% LTV or do these figures not help your propositions? You completely fail to meet the real needs of your real clients. I wouldnt expect anything less from a launch that has been delayed for how long(?) due to and IT hitch? You are bringing NOTHING new to the table so until your do (and you are happy to use brokers) WE DONT CARE!!!!!

  3. Anthony Rafferty 6th August 2012 at 6:18 pm

    I’m assuming this doesn’t suit you Bobby! I think this is a really big deal – Tesco launching really keenly priced mortgage products to suit the vast majority of its customers and consumers in the UK. Well done David.

  4. Bobby – clearly incensed but hits the spot in terms of Tesco’s me-too conservative approach. Tesco are doing nothing for first time buyers who are key to getting the the property market moving. opportunity lost.

  5. The reason that the percentage of higher LTV lending is so low is because there are hardly any lenders prepared to go much beyond 80% LTV. As for asking their customer base, their customer base is about half the population. If Tesco wanted to do anything towards helping their customers then they would take the plunge and do something a little different from everyone else. They just want to rape and pillage the ‘easy’ stuff, take no responsibity for offering advice and do things on the cheap over the phone. This tells me everything I already knew about Tesco

  6. Lets hope they quickly develop a more accurate understanding of the market place or their foray into the world of mortgages will be very short lived!

  7. as the late great Eric Morecambe would have said –

    (cough) RUBBISH!

  8. william kingsley 7th August 2012 at 9:20 am

    If they had gone straight into 95% lending they would have been swamped by difficult applications that would have caused damage to the brand due to the decline rate. They are right to test out their processes on easier stuff. They have done ok in the personal loan market so I fully expect them to do well in mortgages. As brokers we are well used to competition from banks and we will survive and prosper. Hopefully this will increase price competition and shake up the High St. We’ll see.

  9. Bill Wells is spot on. Typical retailer brings out a badly designed product then blames the customer for the design. The man is a joke!

  10. what they should of done was ruffle a few feathers and gone for the higher LTV stuff, and stimulate the market,
    Oh but that would of been a challenge so lets go for the easy stuff.
    If I had a backer I would happily go into the higher LTV market and help first time buyers and growing families alike.

  11. Perhaps you should be able to cash in your Tesco point for a better deal – HaHa 0r better still one tesco point for every pound borrowed, I think it might work!!!!!!!!!!!!. Tesco’s are out for world domination.

  12. No demand for 95% lending??!! Bobby and Bill above are spot on. With no competition, no products and prices in London and South East so high, who would envy any first time buyer on average wage or lower?
    Tesco are after the easy money alright!

  13. This 80% LTV is doing nothing to help first time buyers and growing families who are struggling to get on the property ladder. Average rent for a typival three bed property in greater london/ middlesex is £1300, this is greater than the mortgage that one would be paying on a 95% LTV on a property in the same area. If one can afford to meet this rent on a monthly basis why can’t these mortgage lenders assist them to make a start. Tesco is doing no different from the other lenders. I do not know which customers they interviewed, but this could not represent the needs of their customers.

  14. Very little helps 9th August 2012 at 9:10 am

    I’m sure Tesco understand the mortgage market well enough, but as stated previously, this looks like them dipping their toe in the market first (aiming for less risky customers). I’d imagine as they find their feet, their product range will expand .. though do agree it hardly brings anything new to the market or helps stimulate the lower end of the market to get the rest of it going. Given a large proportion of the Tesco customer base is young & growing families, it hardly does much to help their core customers.

  15. Tesco have set out their proposition to allow them to “cherry pick” the low loan to value, prime status clients and this is pretty much what we should expect. Their whole marketing premise is aimed at sweeping up vast swathes of Middle England and I must admit to being concerned on the impact of Tesco on the broker market.

    In Tesco’s position I would have done exactly the same thing. Why go to the bother of a 95% LTV product when they can make money on the perceived less risky section of the market.

    Maybe, if there is a ban on non-advised sales, we will all become Tesco Mortgage advisers. In the current environment, every little helps!

  16. Why on earth would tesco’s go for high ltv mortgages. Firstly, if house prices continue to go down they could lose money, not a very clever idea. Also, by their very nature, high ltv are going to be more likely to default on the mortgages and i would imagine the last thing that tesco want is headlines like “teco threw our family out of our home”.

    Much easier and more profitable to use their vast resources to take a slice off the easy and lucrative market with low ltv’s. They can trade against bad feelings to the banks. Have slightly better deals for people who want to go direct without actually taking any risk.

    I must admit if I was lucky enough to be running things st tescos and wanted to get involved in the mortgage market, that is what i would do.

  17. It’s fine for Tesco to launh a product that suits them, even if it is slightly arrogant to say “this is what we are launching: like it or lump it”
    However, as some others have said, it is wrong for Tesco to say there is no demand for 95% loans based on the 2% take up. The reason for that is no lenders. I can’t think who they have been talking to to come up with that tosh of a conclusion. It certainly cannot be their customers! OK 95% loans are not without their challenges, but they could do their customers a welcome service and clean up!!

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