Citigroup announced plans yesterday to extricate itself completely from new sub-prime lending in Britain, with the loss of up to 700 jobs.

The American bank is closing down Future Mortgages, its mortgage operation, and CitiFinancial, its unsecured loans business.

Its 92,000 mostly sub-prime customers – people with blemished credit histories – will continue to be serviced by other parts of Citigroup on the same terms.

The bank said that it planned to close its Doxford call centre operation near Sunderland, where 400 people are employed, and 49 CitiFinancial branches, employing 300 people. The bank has entered into consultation with the staff affected. Some may be offered jobs elsewhere in the group.

Citi said it acquired the businesses in 2000 and 2001 and that it started to wind down new loans to sub-prime customers three years ago.

Future Mortgages specialised in providing first and second mortgages to sub-prime borrowers applying through brokers and other intermediaries. CitiFinancial, the bank’s main sub-prime brand, provided unsecured loans again to borrowers introduced through intermediaries.

Bert Pijls, business manager for Citigroup’s British consumer business, said that after a strategic review, the two operations had not been identified as areas for growth. Instead, Citigroup would focus its firepower through its Citi and Egg brands.

Darren Cook, of the Moneyfacts website, said: “This is another blow for the sub-prime market.” More than 7,000 sub-prime mortgages were on offer a year ago, but the figure now is 1,500, he said. Many borrowers were left stranded in products charging a standard variable rate of 7 to 8 per cent because lenders were much more picky about who they lent to, he said.

Citigroup, by some measures the biggest bank in the world, has been one of those hit worst by the sub-prime implosion in the United States, which led to the dismissal of Charles Prince, its former chief executive. Vikram Pandit, his successor, plans to cut at least 9,000 jobs from the 370,000-strong global workforce.

Alliance & Leicester will increase rates for landlords by up to 0.65 percentage points today, effectively pulling out of the buy-to-let market. The bank will charge investors 7.14 per cent for a two-year fixed rate. The rate rise came as brokers gave warning that now there were no buy-to-let mortgages on the market charging less than 6 per cent interest after C&G, the lending unit of Lloyds TSB, withdrew the last sub6 per cent deal last week.

Mortgages for Business, the buy-to-let specialist broker, said that 6 per cent was a psychological cut-off point for landlords, who can struggle to charge enough rent to cover their mortgages above this level. Jonathan Moore, of Mortgages for Business, said: “This is the first time we have seen this situation for several years. Lenders with mortgage products below 6 per cent have been flooded with applications and have been forced to withdraw products.”

Citigroup came under fire this year after it wrote to 161,000 Egg card customers – 7 per cent of the total – cancelling their cards. It denied that the move was an excuse to exclude what it unprofitable customers.

— Taylor Wimpey, the UK housebuiler, is expected to make about 600 staff redundant. The company is reported to have told staff yesterday that it would close 13 or its 39 branches, getting rid of about 30 per cent of its UK staff.

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