Tesco said it will stop mortgage lending at its banking business due to tough market conditions, as rival lender Nationwide Building Society reported a drop in profit margins.
Tesco Bank, which serves more than 23,000 mortgage customers with total balances of £3.7 billion said it would stop new lending and seek to sell its existing portfolio of home loans.
"In recent years, challenging market conditions have limited profitable growth opportunities," Tesco Bank's chief executive Gerry Mallon said.
Gerry Mallon was CEO of Ulster Bank here before he took up the Tesco Bank job.
Bellwether mortgage lender Nationwide said today its annual net interest margin - a measure of underlying loan profitability - fell to 1.22% from 1.31% the year before, though it was able to stabilise income.
The statements from the two lenders show how competition and a subdued economy are squeezing margins in Britain's home loans sector, a key source of profits for banks.
Nationwide said it expected margins would remain under pressure this year.
Uncertainty over Britain's exit from the European Union has prevented interest rate hikes that could have boosted loan margins, while a glut of new banks and rules pushing established players to lend more have increased the supply of mortgages.
Europe's biggest bank HSBC, in particular, has renewed its focus on home loans in Britain after ring-fencing rules designed to insulate savers' money from riskier trading activity forced it to carve out its British retail bank.
The newly-separated domestic bank had little choice but to boost mortgage lending to make money, intensifying competition in the market.
Tesco bank said its priority would be to sell the entire mortgage portfolio for an acceptable price, as it exits the business in favour of other unspecified opportunities.