Derin Clark

Derin Clark

Online Reporter
Published: 25/09/2019

Sainsbury’s has announced that it is no longer going to continue mortgage lending, resulting in all its products being pulled from the market.

Existing Sainsbury’s customers will be able to continue with their mortgage agreement, however they won’t be able to remortgage or take a new mortgage with Sainsbury’s. This move comes only a few months after one of its biggest supermarket competitors, Tesco Bank, also pulled out of the mortgage market and sold its entire mortgage portfolio to Lloyds Banking Group.

Although Sainsbury’s has made no further announcement about its decision to stop mortgage lending, it could also follow Tesco by selling its mortgage portfolio in the future.

Competitive mortgage market

This year, the mortgage market has become highly competitive, with mortgage lenders continuing to cut rates and narrowing their profit margins as a result. This competitive market means that providers not able to compete with the rate cuts, or who are not already highly established in the market, could find themselves struggling again with the intense competition. For example, those looking to get a mortgage on a 60% loan-to-value (LTV) can currently get a mortgage from NatWest for as low as 1.21% fixed until 31 October 2022, while those looking to remortgage can get a rate of 1.24% fixed until 31 October 2021 from Barclays Mortgage on a 60% LTV.

Commenting on Sainsbury’s withdrawal from the mortgage market, Rachel Springall, finance expert at Moneyfacts.co.uk, said: “The mortgage market is exceptionally challenging right now and, with margins becoming ever tighter, it is inevitable to see lenders call it quits and walk away from this sector. It is disappointing news as Sainsbury’s Bank came in to challenge the usual players in this arena, but unfortunately selling mortgages is no longer sustainable to them. Sainsbury’s Bank had mortgages that offered lucrative incentive packages and many were priced competitively for borrowers with smaller deposits of 20%. It also ran its popular Nectar scheme as an additional perk for mortgage customers too. It will be interesting to see whether it sells its mortgage book and which brand perhaps decides to buy it, as this comes just weeks after Tesco Bank sold its own to Lloyds Banking Group for £3.8 bn.”

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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