With the ring-fence in place, funds which formerly could have been used to back riskier investments were now trapped in the retail environment and large retail banks were flooded with liquidity which was then diverted to the mortgage market.
Nick Morrey, product technical manager at John Charcol, said he was “not surprised” Sainsbury’s had exited the market as it had tried to compete against the big lenders “both on price and criteria”.
He added: “When I first heard Tesco was leaving the mortgage market, my next thought was ‘how long until Sainsbury’s goes’.
“They’ve both got smaller banking models and they have to do all their funding from the money markets and there’s not much margin in it.”
Mr Stewart said: “I think it is another example of people having ideas above their station and assuming they could enter the UK mortgage market and disrupt and challenge it.
“It is no surprise that the top ten UK lenders by volume probably hasn’t changed too much over the past 10 years — long established, well-capitalised banks with more than one trick up their sleeve which allows them to play the cut throat lending market longer than others.”
imogen.tew@ft.com
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