Chief executive Benny Higgins hailed the launch as the end of “an epic journey”, attributing a series of postponements to his determination to get the product right and avoid problems.
Tesco will offer mortgages online or by phone to those with a minimum deposit of 20 per cent, but Higgins declined to provide targets for the number of customers it hopes to attract, suggesting that it expects business to build slowly in a difficult market.
The bank, run by 3,000 staff in Edinburgh, Glasgow and Newcastle-upon-Tyne, has raised capital through its savings products and three retail bonds. The mortgage business will be serviced mainly by 100 staff at Atlantic Quay in Glasgow.
Higgins believes that entry into this market marks a key milestone in the development of a full service retail bank.
Tesco already provides credit cards, savings accounts and insurance and will launch cash ISAs before the end of the tax year. It plans to introduce current accounts once switching is made easier under changes being brought in next year.
Tesco is also offering an added incentive for those who do their regular shop at the supermarket, as shoppers with Tesco Clubcards will receive a point for every £4 spent on their monthly mortgage repayments.
Rachel Springall, spokeswoman for comparison website Moneyfacts, said: “As the only supermarket to bring forward a range of mortgages, it will be interesting to see whether new supermarket lenders bring out a range of their own in the attempt to compete with the high street banks.”
The jump into the mortgage market comes at a tough time for mortgage lending generally, as figures from the British Bankers’ Association showed that approvals slumped to their lowest level in at least 15 years in June.
Lenders have been tightening their borrowing criteria, and people with low deposits are expected to have a particularly tough time finding a deal in the coming months.
There have been some recent signs of a mortgage war between lenders competing to attract “less risky” homeowners – those with deposits of around 40 per cent.
Tesco Bank, whose customers hold 6.5 million accounts, was launched in 1997 as a joint venture between the supermarket giant and Royal Bank of Scotland. Tesco bought out RBS’s stake in 2008 for £950 million and the bank is now fully owned by Tesco.
Higgins said: “We have built a bank from scratch and which is under our control. I have resolutely sought not to get involved in what is happening elsewhere. There is still negativity in the sector, but I do think the mood music is changing.”
He said Tesco was unlikely to be interested in acquiring online bank Intelligent Finance which Lloyds has put up for sale following Co-operative Group’s decision not to acquire it in a parcel of assets. Higgins said: “We have the capability we need and we have the brand. It is not obvious what we would get from any acquisition.”
In the year to April, Tesco Bank made an underlying profit of £203m – up 29 per cent on the year before.