Mortgage crisis could benefit Tesco

While Tesco had previously resisted offering mortgages on the grounds that the margins were so tight that they were unprofitable, finance director Andrew Higginson said that the credit crunch seems to have created an opportunity. Tesco may begin offering home mortgages to compete with the major lenders.

"It hasn't been good for the consumer, but we have seen the return of rational pricing in mortgages and that would potentially offer us the opportunity to get in there," he remarked. Higginson also said that Tesco may also begin offering customers current accounts which, despite often operating at a loss, create a relationship with customers, enabling the retailer a foot-in-the-door for other offerings.

Group chief executive Sir Terry Leahy said he would prefer to be operating in a stronger economy, but claimed the company was at its best when times were difficult.

Tesco, which said it wants to increase profits from Tesco Personal Finance to more than ₤1 billion a year over the next few years, warned that substantial changes would probably be at least a year away, with a large amount of integration required in the short term.