Tesco cashes out of the mortgage business

Tesco Bank has left the mortgage market by selling its £3.7bn loan book. Its 23,000 customers will be moved to the Halifax, a subsidiary of Lloyds.

Tesco Bank

Tesco Bank has left the mortgage market by selling its £3.7bn loan book, says The Daily Telegraph. This is in line with a strategy to "slim down the number of services and products it offers to reduce costs". The 23,000 customers will be moved to Halifax, a subsidiary of Lloyds.

While supermarket banking services "were once seen as a credible threat to the dominance of major high-street banks", tighter regulation in the mortgage market and a series of digital-banking apps geared towards winning over younger customers have hampered supermarkets' financial divisions.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

The deal is the latest sign of the "convulsions gripping the UK's mortgage market", says Ben Martin in The Times. These have been caused by post-crisis regulations forcing banks to separate legally their investment banking arms from their high-street businesses.

As a result, the capital that lenders with a global presence would previously have been "free to put to work across their businesses" is now "locked in their domestic divisions". This in turn has encouraged large banks such as HSBC and Barclays to put the money into mortgages, creating "intense competition" that has hit the margins of firms such as Tesco Bank.

Advertisement
Advertisement - Article continues below

Margins in mortgage lending are so low that although the loans were bought at a premium of 2.5%, Lloyds claims that they "would still produce better returns than issuing new loans in current market conditions", says Nicholas Megaw in the Financial Times. It is hardly surprising, then, that Lloyds was not the only bank to bid for them.

Advertisement

Recommended

Visit/519447/tesco-should-keep-its-asian-assets
Stockmarkets

Tesco should keep its Asian assets

The £7bn that Tesco could get for its Tesco Lotus business in Asia looks enticing. But holding on to it would be smarter, says Matthew Lynn.
15 Dec 2019
Visit/517688/the-british-equity-market-is-shrinking
Stockmarkets

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019
Visit/511212/reasons-for-investors-to-be-bearish-but-stick-with-the-stockmarket-bulls
Stockmarkets

There are lots of reasons to be bearish – but you should stick with the bulls

There are plenty of reasons to be gloomy about the stockmarkets. But the trend remains up, says Dominic Frisby. And you don’t want to bet against the …
17 Jul 2019
Visit/510684/good-news-on-jobs-scares-stockmarkets
Economy

Good news on jobs scares US stockmarkets

June brought the best monthly US jobs growth of the year, but stockmarkets were not best pleased.
11 Jul 2019

Most Popular

Visit/investments/property/601110/house-prices-and-covid-19
Property

House prices and Covid-19

The housing market is in deep freeze – what happens when it thaws out?
5 Apr 2020
Visit/investments/property/601081/three-things-matter-for-the-uk-housing-market-now-and
Property

Three things matter for the UK housing market now – and “location” isn’t one of them

The UK housing market is frozen. And when it does eventually thaw out, the traditional factors that drive prices will no longer apply. The day of reck…
1 Apr 2020
Visit/investments/property/601065/what-does-the-coronavirus-crisis-mean-for-uk-house-prices
Property

What does the coronavirus crisis mean for UK house prices?

With the whole country in lockdown, the UK property market is closed for business. John Stepek looks at what that means for UK house prices, housebuil…
27 Mar 2020
Visit/economy/global-economy/601106/the-moneyweek-podcast-russell-napier-how-much-debt-is-too-much
Global Economy

The MoneyWeek Podcast – Russell Napier: how much debt is too much?

Merryn talks to financial strategist and author Russell Napier about the huge levels of debt embedded in the global economy, the governmental response…
3 Apr 2020