Prolific Mortgage Finance managing director Lea Karasavvas (pictured) was particularly disappointed to see the lender leave the market, praising the rates and service.
However, he was realistic about the current market conditions for smaller lenders
“It is exceptionally sad news about Sainsbury’s who really were trying hard to become a competitive lender,” he said.
“The deals we placed with them were quick to offer and competitively priced, but with margins being squeezed so heavily right now, and longer-term fixed money cheaper than I have ever seen in 20 years in this job, there is a definite feel that only the strong will survive these challenging times.
“With the big lenders pricing five-year money at under 1.6 per cent below 60 per cent loan to value (LTV), it’s virtually impossible for the smaller lenders to compete.
“Sadly, I’d expect more casualties before the year is out. Our thoughts go out to all at Sainsbury’s and I would like to thank everyone there for all their help they have given us. They will be missed,” he added.
Good for consumers
Matthew Hillyer, associate director at Largemortgageloans.com, echoed much of Karasavvas’ feelings and his predictions for future departures.
“While it is extremely sad, particularly for the staff concerned, we believe that with the increased competition we are seeing in the market and the inevitable accompanying squeeze on margins, the climate for lenders is increasingly tough,” he said.
“This is obviously good for consumers with extremely competitive rates, but we believe this will likely lead to further consolidation and potentially further exits.”
Re-think for lenders
The expectation of further withdrawals from the market was further reiterated by Coreco managing director Andrew Montlake.
He also noted that the competitive market could be a bridge too far for peripheral mortgage players and that things could get even tougher depending on if and how Brexit hit the market.
“The level of competition in the market is causing a major rethink among lenders for whom mortgages are a bolt-on rather than their core business,” he said.
“Just as with Tesco, for Sainsbury’s the margins are no longer there and its mortgage division was almost certainly struggling to wash its own face.
“Lower home purchase levels are rubbing salt in the wound of the exceptionally low rate environment.
“It’s pretty brutal out there right now and more departures are likely,” he added.