The supermarket bank will no longer accept new loan applications for mortgages, and is "actively" looking to offload its existing £3.7bn loan book
Tesco Bank has put an end to its mortgages business and is looking at opportunities to offload its existing mortgage portfolio.
The bank, which is the financial services arm of the UK supermarket retailer, blamed “challenging market conditions” in recent years for its decision to stop lending to homebuyers – something it has done since 2012.
More than 23,000 customers are currently served with mortgage services by the company, with a loan book totalling around £3.7bn.
Tesco Bank chief executive Gerry Mallon said: “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 that will continue to serve our customers well.”
Tesco Bank decision to abandon mortgages could lead to job losses
While not fully committing to the sale of its existing mortgage portfolio, Tesco Bank does appear poised to offload its mortgage assets, with negotiations to be conducted confidentially.
Tesco Bank was established in 1997 and serves more than five million customers, with a range of personal finance and insurance products including current accounts, credit cards, loans and savings.
It employs around 4,000 people across three main offices in Edinburgh, Glasgow and Newcastle.
Today’s news has prompted fears of job losses as the mortgage business closes, with the bank confirming 20 employees would be directly affected – it has also been reported that more than 100 jobs might be at risk at Capita, the business services firm that administers the loan book.
The UK mortgages market has been sluggish recently, with trade organisation UK revealing last month that gross mortgage lending across the UK residential market in March had been £20bn, 0.5% lower than the previous year.