Relief for thousands of homeowners who risked becoming ‘mortgage prisoners’ as Tesco Bank confirms it has sold their loans to Lloyds Bank
- Tesco Bank sells its mortgage portfolio to Lloyds Banking Group for £3.8billion
- This follows fears the book would be sold to a vulture fund or inactive lender
- Some 23,000 homeowners will now be moved over to Halifax, part of LBG
Thousands of homeowners who risked becoming ‘mortgage prisoners’ can breathe a collective sigh of relief today as Tesco Bank announced it would sell their loans to Lloyds Banking Group.
This follows months of speculation that its customers could be moved to an inactive lender, potentially trapping some borrowers on deals they cannot switch away from and rendering them so-called ‘mortgage prisoners’.
The supermarket giant’s fully-owned bank originally announced that it was looking for a buyer for its mortgage portfolio in May, but refused to guarantee it would not be sold to a ‘vulture fund or inactive lender’.
Today it confirmed that the book of some 23,000 mortgage customers has now been sold to Lloyds, operating under the Halifax brand, for £3.8billion.
Tesco Bank became the highest profile casualty of the mortgage price war earlier this year
Gerry Mallon, Tesco Bank chief executive, said: ‘Our priority throughout has been to complete a commercially acceptable transaction with a purchaser who will continue to serve our customers well.
‘After a thorough process, we are pleased to confirm that we have agreed the sale of our mortgage book to Lloyds Banking Group.’
Tesco Bank had come under pressure from MPs to guarantee it would only sell its mortgage book to a regulated and active lender.
Some 27 MPs from a cross-party group sent a letter to chief executive Gerry Mallon urging the lender to ‘repay its customers’ trust’ by only exploring a sale to an active lender amid fears not doing so could turn customers into ‘mortgage prisoners’.
Currently there are an estimated 20,000 homeowners stuck with lenders that are no longer active – with a further 120,000 stuck with firms that aren’t regulated by the UK’s financial watchdog, the Financial Conduct Authority.
In this situation, customers whose circumstances have changed to the extent that they cannot move to a different bank or building society can find themselves stuck on higher interest rates than they would be paying at a bank or building society actively competing in the mortgage market.
Tesco Bank said it was writing to customers to outline what the switch to Halifax will mean to them.
The group has also now ceased all new mortgage lending citing ‘challenging market conditions’, bringing the curtain down on a major chapter of the group’s push into banking.
Tesco Bank mortgage borrowers set to land Clubcard point windfall following sale
Previously, Tesco Bank mortgage borrowers earned Clubcard points on their mortgage repayments, but today the bank confirmed that following the sale to Lloyds this will stop from 27 September.
However, the group has confirmed that these customers will be offered a lump sum of points in November to ‘say thanks for being a Tesco Bank customer’.
Fixed rate customers will receive a lump sum of points for the remainder of their term based on their contractual monthly repayments.
Those on tracker rates will also receive a Clubcard points lump sum based on the remaining length of their deal, while standard variable rate customers will receive a year’s worth of points.
Those in the application process or switching to a new new deal will also receive a lump sum, as long as they have reached the formal offer stage.