Tesco plans to offer mortgages delayed by regulatory checks

Published 04th Oct 2010

The Financial Services Authority has toughened up its rules since the collapse of Northern Rock and Bradford & Bingley


Supermarket giant Tesco's plan to march into the home loans business this autumn is facing a severe delay – the grocer has yet to receive permission from the City watchdog to offer mortgages.

Tesco's new banking arm had hoped to launch mortgages before Christmas, followed by current accounts next year. However it is understood that the supermarket could be bogged down in red tape for up to 12 months.

The Financial Services Authority has toughened up its rules in the wake of the credit crunch, which claimed high-risk lenders such as Northern Rock and Bradford & Bingley, and is keen to make sure any new entrant is copper-bottomed.

Tesco confirmed that the new banking products were behind schedule: "The FSA is just being careful. It is a new process and it is very difficult."

The setback for Tesco has emerged just days after the Bank of England warned the mortgage crunch was entering a new phase. Lenders now demand far larger deposits than in previous years and in its credit conditions survey the Bank said their loan criteria had become even stricter in the past six months.

On Tuesday Sir Terry Leahy will preside over his last set of company results as chief executive of Tesco. The the supermarket group is expected to report a 10% increase in first-half profits to £1.7bn, on sales of £30.1bn. Leahy is stepping down in March and will be succeeded by Phil Clarke, who heads its international division.

Tesco will say strong international sales helped make up for a sluggish performance at home as smaller rivals Sainsbury – which will update the City the following day – and Waitrose pile on the pressure. Last week Waitrose upped the ante with a campaign promising to match Tesco prices on 1,000 everyday products ranging from Heinz baked beans to Persil and Hovis bread. Tesco's UK like-for-like sales growth is expected to be just 0.4% for the second quarter behind Sainsbury, where analysts anticipate growth of more than 2%.

Source: ' Guardian '

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