Santander moves ahead in race for Tesco mortgage bundles

Tesco Bank has about 23,000 customers in its mortgage book.

Lloyds, RBS and Santander made it through to the penultimate round of suitors last week, but Santander is said to be nosing ahead of the pack.

According to reports, the Spanish bank is expected to enter exclusive talks to thrash out a price for the book of home loans.

Financial “ringfencing” rules designed to separate customers’ deposits from riskier investment banking has intensified competition in the mortgage market and left high-street giants with a flood of cash to put to work in the mortgage market.

The weight of competition forced Tesco out of the market in May and will now refocus on home insurance and could make a return to travel insurance.

The online bank has about £10bn of deposits and operates a vast network of cash dispensers.

Last week, Santander reported profits of £575m for the first half of the year, down 36 per cent on the previous year.