Brokers have welcomed the expansion of supermarkets into the mortgage lending arena following Sainsburys’ re-entry into the market.
The UK’s second biggest supermarket announced its return to the market in April, launching residential home purchase mortgages and remortgages for first-time buyers, including fixed and variable-rate products with loan-to-values of up to 90 per cent.
Sainsburys joins established player Tesco, which launched its mortgage range in 2012 and entered the intermediary market in 2016, and now has mortgage balances worth £2.2bn.
Brokers believe the supermarkets will be able to offer innovations that will benefit intermediaries and consumers - and some believe more shopping giants could follow suit.
David Hollingworth, associate director for communications at London & Country Mortgages, said Sainsburys’ announcement was “good news for brokers”.
He said: “We are in a very competitive market and I definitely think Tesco and Sainsburys, with the brand presence they have, can use that to their advantage in putting together compelling mortgage products.
"Tesco has already shown it can price as well as anyone.
“If you have more lenders in there, you are more likely to get a bit more innovation. It is something that can drive innovative pricing for customers, and that has got to be good for us as brokers.
“Sainsburys, by virtue of the fact that it has launched direct to the intermediary, demonstrates it is very much planning to take some share.
“I think there is no limit to their potential. All of these new brands that can compete will at least give the odd bloody nose to some of the bigger lenders.”
Mr Hollingworth said there could be other supermarket brands – a number of which already have a financial services offering - looking to enter the mortgage market.
Lea Karasavvas, managing director at London-based Prolific Mortgage Finance, also welcomed the move and said the supermarkets’ brands provided an added incentive to offer good deals.
“The additional factor here is that supermarkets have very strong brands and very big reputations. They can damage these by getting things wrong, so everything needs to be right or the brand will suffer,” he explained.
“The only downside would be the distribution channel, but by opening this up to intermediaries, this is diluted as the intermediary will help reach a bigger market and give the consumer a greater understanding of them as a lender.”
But some brokers were more sceptical about supermarket brands’ potential to take a big slice of the market.
Danny Matthews, Cirencester-based consultant in financial technology and digital solutions, said: “They are very welcome in the market to give more choice and it may have a short term impact of building trust with consumers in the sense that there was a time we would have never shopped for a mortgage in the same place that we do our weekly shop.
“I do fear though that the supermarket brand will only get you so far. In the long term, I don't think consumers will feel any meaningful impact.”
John Phillips, group operations director at Essex-based Just Mortgages and Spicerhaart, said: “The expansion of supermarkets into the mortgage sector is of course a positive move, but I do not think they will become big players in the market. They are likely to remain a niche sector - which isn't a bad thing."
But the other major supermarkets currently seem in no rush to join Sainsburys and Tesco.
A spokesperson for M&S Bank told Financial Adviser it had no plans to expand into mortgages, while a Morrisons spokesperson said it did not offer financial products.
Asda was also contacted for comment.
simon.allin@ft.com
