Sainsbury’s Bank is planning a return to mortgage lending after exiting the market more than a decade ago.
The supermarket chain’s financial services arm reported £65m underlying profit in its latest preliminary results, a cash pile it said enables it to re-start lending.
“Given the bank’s strong trading performance and the trust people have in the Sainsbury’s brand, we have decided to launch new mortgage products in 2017,” the statement read.
“We believe these products will complement our existing financial services portfolio and we expect customers to respond well.”
Over 2016 and 2017, Sainsbury’s expects operating profit at the bank to be around 10 per cent lower year-on-year due to investment required to enter the mortgage market and the impact of reduced interchange fees, according to the statement.
“Results prior to the impact of entering the mortgage market and the reduced interchange fees, would result in a year-on-year profit improvement,” it added.
Sainsbury’s pulled out of the mortgage market in 2004, reportedly due to a lack of interest.
Rumours of its re-entry have been around since this time last year, when the bank brought in former Aldermore boss Colin Snowdon as a consultant to investigate the market.
It also registered the domain names sainsburysmortgages.co.uk and sainsburysmortgages.com in December.
The move follow’s rival challenger Tesco Bank announcing its entry into the intermediary mortgage market, in an initial deal with London & Country mortgage brokers, along with Legal & General’s key account firms, including Nouveau Group, Mortgage Advice Bureau, John Charcol and Stonebridge.
Oliver Marley, a mortgage researcher at broker Independent James, commented that Sainsbury’s have an established relationship with the public as a ‘family’ brand, so it’s good to seem them re-entering the market.
“Mortgages are more difficult to package than standard loans and cards as mortgages come with heavy regulatory restrictions - so I’m interested to see how they will deliver this. I know their pricing will be competitive, as always, so embracing intermediaries will be key to reeling in the business.”