Barclays has announced that it is to stop selling secured loans through its market leading Firstplus brand as a result of the downturn in the mortgage market.
The banking giant today confirmed that Firstplus will be closed to new business from 9 August, resulting in 300 job cuts. In addition, its Barclayloan and Fair & Square subsidiaries will also close to new business.
Firstplus was established in 1997 and acquired by the Woolwich in 1998. In 2004, it became part of Barclays when the bank acquired Woolwich and is currently the largest secured loan provider in the UK with around 128,000 customers.
According to uSwitch.com, Firstplus’ departure from the secured loan market will leave just seven players – down from 18 this time last year.
Secured loans, also known as second charge mortgages, are available to homeowners who want to raise money through the equity they own in their homes. Unlike personal loans, secured loans use a property as collateral – meaning that borrowers face the prospect of repossession if they miss payments.
However, problems in the property market mean demand from consumers for secured loans has fizzled. Meanwhile, banks have increasingly shied away from this area of the market because of the perceived higher risk of secured lending.
Firstplus says the announcement will have no impact on its existing customers.
Neil Radley, managing director of Firstplus, says: “In the past year we have tried a whole range of activities to develop our business but the market demand simply isn’t strong enough.
“We recognise this is a difficult time for our people and will be providing all those affected with support and assistance.”
Following the announcement, price comparison website moneysupermarket.com issued a profit warning.
The London Stock Exchange-listed company warned that trading in the loans market was currently “extremely challenging”. The closure of Firstplus is likely to reduce the website’s revenue by around £7 million.
Tim Moss, head of loans at moneysupermarket.com, says the closure of Firstplus is a “huge blow” to the market.
"For people with multiple unsecured debts, often at high rates of interest, the option of using a secured loan at a lower monthly payment to reduce their outgoings has been extremely attractive,” he adds. “For many though this option will disappear because, while there are other secured loan providers in the market, their capacity to lend is likely to be limited.”
Moneysupermarket.com's share price is currently trading 32% down at around 59p.
What does this mean for Firstplus customers?
The closure means that Firstplus will only accept applications from new customers up to and including 8 August. Until then it is business as usual, but after that date any applications received will not be processed.
If you have an existing loan then you should continue making your payments as usual. You can continue to contact Firstplus in the usual way, and no aspect of your loan will change as long as you continue to manage it properly.
If you were in the process of arranging to settle your loan early then you can still do this, and you will not have to send your request through again.
If you are an exisiting customer planning to apply for a further advance on your loan, then you must do so before 8 August.