Tesco mortgage launched

The supermarket giant Tesco has announced the launch of its own mortgages.

Homeowners will be able to apply for the low-cost loan over the Internet or by phone.

The Tesco mortgages will be directly linked to the Bank of England interest rates for the first three years, before climbing 0.99 percentage point higher from then on.

Alistair Smillie, Tesco's mortgage chief, promoted the product.

"By applying Tesco value and pricing, we believe home-buyers will now have a real money-saving alternative to many of the over-complicated products offered elsewhere," he said.

Mortgage broker Rob Clifford was cautious, however, telling the Times newspaper: "Tesco mortgages will face tough competition from other lenders' well-priced fixed deals and the swell of consumer appetite for the security of fixed monthly payments."

The loans will be backed by Tesco and its partner the Royal Bank of Scotland, joint owners of Tesco Personal Finance.

Supermarket rival Sainsburys stopped selling mortgages this summer after a disappointing take up.