Lloyds snaps up £3.7 billion of Tesco Bank home loans

lloYDs has grabbed a bigger share of the UK mortgage market through a bumper deal with Tesco Bank.

More than 23,000 Tesco Bank customers will see their mortgages moved to Halifax.

lloyds, which owns Halifax, has agreed to buy the £3.7bn of mortgages, with Tesco deciding to wash its hands of the business after a vicious price war.

lloyds, which already had around 20pc of the UK residential mortgage market, has now bumped up its share to 20.5pc.

It thinks it can make more money from these existing mortgages than it would if it started handing out new loans in current market conditions.

In the year to February 28, the book of Tesco mortgages generated a £9.1m pre-tax profit.

Tesco Bank customers who were on fixed-rate mortgages will see no change to their interest rates, while Halifax will decide whether those on tracker rates will continue to move in line with the Bank of england’s base rate. It will also be up to Halifax to decide how standard variable rates will move, once it takes hold of the loan book at the end of september.

Tesco announced it was stepping out of the mortgage market in May, saying it would stop new lending and focus on a narrower range of products.

It blamed ‘challenging market conditions’ for pushing down profits across the sector, and leaving lenders searching for economies of scale.

Just this week, HsBC UK’s chief executive, Ian stuart, said his bank was planning to lend an extra £35bn to homeowners, to beef up its share of the market from around 7pc to 10pc.

Part of the struggles have flowed from ring-fencing legislation last year, which forces banks to separate their domestic businesses from their international and investment banking arms.

It has left several lenders with huge excesses of UK customer deposits, which they must now pump back into the UK retail market.