The Prudential group is withdrawing from the equity release (lifetime mortgage) market during the first quarter of next year.
Prudential said the product, which enables retired people to unlock money tied up in their home without having to move, was too capital intensive, and it could us the funds more profitably elsewhere.
The group first entered the equity release market four years ago, and it now has 14,000 customers and a lifetime mortgage book worth £1 billion.
But it has seen its share of the market halve this year, dropping from 23% at the end of 2008 to 12% during 2009 so far. Lifetime mortgages enable retired homeowners to borrow a lump sum against the value of their property, but the debt is not repaid until they die or move home. As a result, a significant amount of capital is paid out up front, but it is often many years before any of the money is repaid.
Barry O’Dwyer, managing director of retail life & pensions, said: “The focus for Prudential UK remains to compete selectively in areas of the retirement savings and income markets where we can generate attractive returns on capital employed.”
Existing lifetime mortgage customers will not be affected by Prudential’s decision to pull out of the market.
The number of providers of this financial service has dropped from 20 to 11 over the past year.