Have a little gander on the Tesco website today and you’ll find that the grocery giant has introduced mortgage lending where repayments will earn you points on your Clubcard. That’s right, pay your mortgage on time and earn points towards your weekly shop: the ultimate household management experience. The scheme is an extension of the supermarket’s existing presence in financial services – the Tesco Bank brand has been around for some time – but we think this kicks things upstairs. It’s the largest sum of money most people will ever borrow, for one thing.
Given the state of the banking industry’s reputation just now, there is clearly room for some competition. But the scheme could turn into an absolute turkey if Tesco doesn’t play it right, however. Whilst the chain’s existing reputation might be enough to get customers on board, mortgage lending inevitably means the chain could be involved in repossessing people’s homes if they don’t cough up the money each month. Aside from the fact that this would be absolutely catastrophic PR for the existing business, it also means that Tesco’s rumoured plans to get even further into retail banking would be mired in critical press coverage before they can even get started. MT can see the redtop headlines now: ‘Tesco, the home wrecker’.
Mortgages from Tesco Bank are available as of today, and if you’re the proud holder of a Clubcard, you can earn one loyalty point for every £4 you repay each month on your mortgage. Philip Clarke, chief executive of Tesco, said: ‘Customers want choice in banking from a brand they know and trust to deal with them fairly.’
Since the mortgage product is a new launch for Tesco, it is having to undercut its more established high street competitors. Its standard deal is 3.89% on a 5-year fixed rate mortgage as of this afternoon, while the closest equivalent on HSBC is 4.99%, and with Lloyds TSB, 3.94%. Every little helps.
Still, we watch and wait to see how Tesco Bank mortgages will pan out for the chain. Given the bad press that has engulfed the financial sector in recent years, it’s certainly a gutsy move to add a banking string to your bow…