Barclays has withdrawn from the secured loan market, the bank said yesterday.

The UK's fourth largest bank said its decision was a result of "slowing demand". It will stop making new loans from August 9 but its existing 128,000 customers would not be affected.

Barclays provided homeowner loans - which are secured against a property that already has an existing mortgage - through its Firstplus business, fronted by Carol Vorderman.

Moneysupermarket.com, the price comparison website, issued a profits warning immediately after the announcement by Barclays, admitting the move could hit profits by up to 10 per cent.

The announcement came amid signs secured loan providers are coming under pressure from the rising cost of funds and the crackdown on payment protection insurance, often sold alongside the loans.

Other lenders such as GE Money have recently scaled back their business while Picture Financial has been taken over by Targeted loans.

In recent months, secured loan providers have also been tightening their lending criteria. Firstplus, a market leader in secured loans, recently reduced the amount it would lend from 125 per cent of a home's value to 95 per cent.

David Hollingworth, of L & C, the broker, said: "We have seen second charge providers showing a lot more concern about exposure in terms of the amount they will lend."

Last year, Barclays tried unsuccessfully to sell Firstplus, which it acquired in its takeover of Woolwich in 2000.

Neil Radley, managing director of Firstplus, said: "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."

Moneysupermarket said profits could fall £5 million this year as result of the move by Barclays and its shares fell 17 per cent, by 14.75p to 73p, following the announcement.

Simon Nixon, chief executive of moneysupermarket.com commented: "We have warned that trading in the loans and mortgages sector was "extremely challenging". This is evidenced today by the withdrawal of Barclays' main secured loan brand, Firstplus, from the market. Over the coming days we will work to mitigate the impact of this on our business. Trading across the rest of our business remains in line with our expectations."

Moneysupermarket appeared surprised that the move to halt lending by Firstplus was down to a lack of business. The website has a strong relationship with Firstplus, promoting the loans across its site and had negoitated an exclusive interest rates for customers who applied for secured credit through its website.

Tim Moss, head of loans at Moneysupermarket.com, said: "We've seen the number of applications for secured loans grow in the last year, as the credit crunch forces people to consolidate their debt. Moneysupermarket had a really good volume of applications going through before this announcement."

There are now just seven providers in the secured loan market, according to uSwitch, the price comparison website, down from 18 last year.