Tesco Leave the Mortgage Business
In September 2019, many were surprised to learn that supermarket Tesco would be leaving the industry of mortgages. Consequently, Tesco Bank sold its £3.7 billion loan book to Halifax, which is part of the Lloyds banking group. Tesco Bank’s loan business had more than 23,000 customers. This may seem a small number for other mortgage firms, but it’s arguably a sizeable figure for a brand whose core product, groceries, is quite far apart.
It’s also a huge shift, as Tesco Bank only began offering mortgages in 2012. The brand got into mortgages more than 15 years after it was first created, but shuttered them seven years later.
Tesco is Trying to Cut Costs
The decision to hand over Tesco Bank’s mortgages to Halifax comes as part of a larger cost-cutting program at the supermarket brand. In 2015, Tesco announced record losses of £6.4 billion, as it lost out to budget supermarkets such as Aldi and Lidl, with fewer customers reported as visiting its large out of town superstores.
Tesco has closed more than three dozen stores since then and, in August 2019, the supermarket announced that it would be cutting more than 4,500 jobs at 153 of its Tesco Metro stores. The company said that it is trying to run its business “more sustainably” – and mortgages don’t seem to be part of that.
Consumers Are Getting Smarter About Mortgages
However, the supermarket giant’s financial issues aren’t the only reason why the supermarket may have gotten out of the mortgage industry. Consumers are getting smarter about lending and mortgages, and that means that supermarket mortgages, which were once a convenient way of financing the purchase of a home, may no longer be the best deal.
The internet has given consumers far more choice so that they don’t only have to look at high-street lenders for mortgage rates. Having changed so much in our consumer habits, the online world is also changing the world of mortgages. Interactive, intuitive websites like Trussle let people compare the best remortgaging deals or fixed rate mortgage for them without having to go all the way to an out-of-town Tesco or even leave the house. Mortgage comparison sites like the former also provide in-depth information and reviews, helping consumers know what to look for and how to find it.
How to Provide a Great Mortgage Experience
Tesco Bank’s mortgage business may have gone the way of the dodo, but that doesn’t mean that the mortgage industry should be worried. The value of mortgage loans in the UK is growing, as residential mortgage loans reached £1,451 billion in Q1 2019, which is a growth of 3.4% on the year before.
It’s rather the way that people are accessing mortgages and other financial information that is changing. Trade body UK Finance revealed that four in 10 people now use mobile banking apps often, confirming that technology is making financial services more accessible. The popularity of mortgage comparison sites suggests that this is another area where consumers would like to go digital.
A careful approach is needed with such ventures. Tesco Bank’s mortgages may have succeeded for a long time because of how famous the brand is, but this type of approach probably won’t work for much longer – for lenders but also for companies far and wide.