Tesco Bank swamped by people trying to switch their accounts

TESCO Bank has had to stop customers from switching accounts after it became overwhelmed by a rush of current account holders trying to move banks.

A quarter of a million Tesco Bank customers were told last month that their current accounts will be closed later this year, triggering a flood of people contacting the bank to try to move to a new lender through the Current Account Switching Service (CASS).

The bank told customers over the weekend that it was temporarily halting applications for current account switches as a result of high demand, while many customers used social media to complain about the freeze over the weekend.

A Tesco Bank spokesman confirmed the decision, saying that high demand had led to delays for some customers.

The bank, which launched its current account service in 2014, stopped offering them to new customers in December 2019.

Last month, it confirmed that existing customers’ accounts would be closed on Nov 30. Tesco Bank estimated that only 12pc of these accounts were being used by customers as their primary current account, saying that most had limited activity or were used for other purposes.

It has been difficult for supermarkets to break into banking. Tesco sold its mortgage book to Lloyds for £3.8bn in 2019 after saying it would abandon the sector due to “challenging market conditions”.

A spokesman for the CASS said: “We are working closely with Tesco Bank as they seek to resolve the issues some of their customers have had as they try to switch to new current accounts. Those customers will benefit from the Current Account Switch Service guarantee, which means their new bank will switch their payments and transfer the balance, and their old bank will take care of closing the old account.”

♦ First-time buyers are now able to access mortgage rates below 0.9pc as the price war between banks escalates.

Halifax launched a two-year fixed deal at a rate of 0.83pc – the cheapest of its kind mortgage brokers have known.

The lender also revealed a five-year fixed mortgage at a rate of 1.03pc. Both are available to home movers, including first-time buyers, with a 40pc deposit and come with a fee of £1,499.

It is the second consecutive week that Halifax has slashed its rates after it launched a five-year fixed mortgage at 0.98pc at the start of the month. That rate was only available to customers remortgaging, but undercut the rival 0.99pc deal of the same length launched by Nationwide weeks before.

Lewis Shaw, of broker Shaw Financial Services, said: “I’ve never seen anything like the latest rates from Halifax.”