TESCO's plans to provide full banking services

The third largest retailer in the world and Britain’s biggest supermarket, Tesco, has unveiled plans to start offering mortgages. They are cornering this part of the market because they feel the shortage of home loans offered by banks has produced an opening in the market.

Its Tesco Personal Finance (TPF) counterpart will also be moving towards being a full-blown bank offering a range of services to its customers such as current accounts, savings accounts, loans, credit cards and insurance.

Chief executive Sir Terry Leahy said: “There is an opportunity to go faster with Tesco Personal Finance now and we are excited about the potential. It will become a full service retail bank and that offers huge scope for the long term.”

Tesco stroke a deal with Royal Bank of Scotland in July to buy its half-share in TPF for £1billion.

Finance director Andy Higginson, who will run TPF, said “Customers are looking for a service they can trust and somewhere it’s safe to put their money. People are generally worried about where to put their savings in this kind of environment and there is an opportunity for a challenger brand like Tesco to come in.”

He went on to say that customers have been heavily investing in the business over the last week after moving their savings over from elsewhere.

The news came as Tesco reported a rise of 11.3% in half-year pre-tax profits to £1.43billion, rising above City forecasts and boosting shares up from 17.7p to 387.6p.

Sir Terry said he was pleased with the customers' reaction to the introduction of 400 new discount brands as part of the Tesco Value brand launched in September, making them a new rival to budget stores like Lidl and Aldi.

Tesco’s value range makes up only six per cent of its overall sales, however, this figure tops Aldi's entire UK turnover.

Tesco has made plans to open 6 non-food Homeplus stores over the next 6 months in across ctities including Nottingham and Edinburgh.

It has also been reported that Sir Terry recently wrote a letter to the Bank of England urging it to cut interest rates.