A sustainable source worth studying

While protection sales have soared as an alternative income source brokers seem to have overlooked general insurance. It requires some homework but once set up provides a steady flow of payments

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Tesco Bank has announced plans to sell a range of mortgage products by the end of this year, adding to the successful range of off-the-peg insurance, loan and credit card products it sells in its stores.

I am not sure the loyalty transfer will work as well with mortgages as it clearly has done with simpler financial products.

The transparency of less complex products makes them easier to sell off the page, with some carefully positioned marketing literature trading on the brand loyalty that already exists. But mortgages are a different proposition.

Tesco has not clarified how it plans to sell mortgages but has said separately that it plans to extend its trial of in-store financial advisers, as well as opening two new offices in Glasgow and Newcastle under the Tesco Bank banner.

Sainsbury’s tried to sell mortgages unsuccessfully a few years ago when competition was at its peak so I am not sure how Tesco’s plans will fare in a market that is now so risk-averse.

With the regulator piling additional requirements onto lenders to ensure they are managing risk more effectively, coupled with a relatively flat housing market, Tesco’s timing appears odd.

It could be attracted to the huge profits to be had from mortgage lending at the moment, with rates at a record low generating the sort of margins never seen before.

If Tesco operates its lending arm using a call centre, this could gain it some traction. The brand certainly has a significant amount of value so the stores could drive lead generation to the call centre.

But it would need to ensure there is a competitive offering as well as a slick process.

The mortgage proposal comes on the back of Tesco’s recent announcement that it will start selling houses in a joint venture with Spicerhaart. I wonder if it sees this as an additional opportunity to capture potential mortgage business.