The bank, which has been selling mortgages since 2012, provides home loans to over 23,000 customers and is currently lending a total of £3.7 billion to these borrowers.
It blamed ‘challenging market conditions’ for its decision to pull out of this market and revealed it was ‘actively exploring’ options to sell its existing portfolio of mortgage loans.
Gary Mallon, chief executive of Tesco Bank, said: “Our focus is no 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 ceased new lending to new customers and announce our intention to explore a sale of our portfolio.”
Impact on customers
Tesco said it would look for a purchaser which would ‘serve its customers well’ but that it was not certain that any sale would necessarily take place.
If it does decide to go ahead with a transaction, customers would be notified to explain what this would mean for their mortgage.
Tesco said there would be no changes to customer accounts as a result of this announcement and customers did not need to take any action.
Consumer choice
Meanwhile, mortgage experts said that Tesco had become a victim of a highly competitive market.
Dilpreet Bhagrath, mortgage expert at online broker, Trussle, explained Tesco had strict lending criteria which meant customers with adverse credit or unusual circumstances favoured other lenders.
Tighter regulations and the rise of app-based banks, meant Tesco had lost its foothold in the market, Bhagrath said.
She added: “Although fairly small, with just 23,000 customers, the loss of any lender takes a hit to consumer choice. However, with mortgage rates still very low, any effect on the range of deals across the rest of the market is likely to be minimal.”
Andrew Montlake, director of mortgage broker, Coreco, said: “It’s a small blow to consumer choice but thankfully there are lenders aplenty that are financially strong and keen to get money into the market.”
