The lender’s purchase of Tesco Bank’s book of more than 23,000 mortgages for £3.8bn was revealed this morning.
It will place these borrowers under the Halifax brand and allow them to move to Halifax terms when their existing deal expires.
The All-Party Parliamentary Group on Mortgage Prisoners called on Tesco Bank to seek an active lender for a buyer back in June, after the book was put on the block.
The portfolio has a lending balance of £3.7bn and generated pre-tax profit of £9.1m in 2018-19.
The portfolio, and arrangements for ongoing administration, will transfer to Halifax, a division of Bank of Scotland, which is wholly owned by Lloyds Bank.
Customer accounts will transfer “once the necessary transitional arrangements have been delivered”. Beneficial ownership transfers at the end of September 2019, with legal title occurring by end of March 2020.
Commercially acceptable transaction
Gerry Mallon, chief executive of Tesco Bank (pictured), said: “Our priority has been to complete a commercially acceptable transaction with a purchaser who will continue to serve our customers well.
“After a thorough process, we are pleased to confirm that we have agreed the sale of our mortgage book to Lloyds Banking Group, operating under the Halifax brand. We are confident that they will continue to provide our customers with an excellent customer experience,” he said.
Tesco Bank said the sale reflected its strategy to focus on a reduced number of products and services and that it would lower operating and funding costs.
Proceeds from the sale will be used to reinvest in the business, to fund ongoing transformation and to re-balance retail and wholesale funding sources.
Mallon said: “Our focus is on 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.”