Principality Building Society has pulled out of the second charge market after deciding to stop new lending through Nemo Personal Finance.
Nemo, one of the biggest lenders in the second charge sector, will focus on its current customers and says it will honour its existing pipeline of business.
Sources say Principality believed the market was taking on a different risk profile than it was comfortable with, including larger loan sizes, and so the decision was taken to pull out of the market.
The second charge market will be regulated in the same way as first charge mortgages when the Mortgage Credit Directive takes effect on 21 March.
Nemo has told brokers that today’s news has nothing to do with the incoming regulation.
Principality group chief executive Graeme Yorston says: “Nemo has had a very positive year with profits of £14.0m (2014: £13.9m) and a strong balance sheet reflected in reduced levels of impairment charges. Competition in the market has remained high.
“Nemo has defended its market share well and concentrated on providing excellent customer service and putting customer outcomes at the heart of its business.
“However the secured loans market continues to develop and expand away from its traditional base. We have carefully managed this business but, as a result of these developments, we do not want to increase our participation in this market.
“The board has therefore taken the decision to cease new lending at Nemo and focus the group’s investment on the core building society and commercial businesses.”
Principality also released its 2015 results today.
The company made an underlying profit of £57.8m in 2015, up 11.3 per cent from £51.9m in 2014.
The firm’s accounts show it spent £4.5m on a strategic review and restructuring costs for Nemo in 2015.