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Peer2Peer Finance News | May 27, 2019

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Credit conditions increasingly challenging for borrowers, warns S&P

Credit conditions increasingly challenging for borrowers, warns S&P
Suzie Neuwirth

CREDIT conditions are tightening across the world due to trade tensions, higher borrowing costs and signs of a slowdown in economic growth, according to a new report from Standard & Poor’s.

The ratings agency has warned that “the risk of a recession is inching higher as volatile share prices squeeze financing conditions.”

It went on to say that central banks’ tightening monetary policy and the US/China trade war have worsened the global trade slowdown.

Read more: Lenders report boom in demand for unsecured credit

“China’s policymakers are taking moderate steps to boost activity as growth is decelerating a bit more than expected, and bank funding costs are down – but lending rates remain stubbornly steady, and credit growth continues to decline,” the report said.

Other credit risks cited in the S&P report included emerging market vulnerabilities, populist sentiment worldwide and cyber security threats to business activity.

Brexit was cited as a key regional concern within the report.

“While the governments of both have agreed to a Brexit withdrawal plan and on a political declaration about the future relationship, designed to facilitate an orderly transition, there is significant risk that the UK parliament won’t approve these agreements,” it said.

“If this happens, the level of uncertainty and political difficulty for the government should not be underestimated.”

Read more: Funding Circle: Investors can expect 5pc returns in a recession

‘Big three’ peer-to-peer lender RateSetter recently said that Brexit will have little impact on its business or investor returns.

The firm said that changes in the economy tend to be gradual, occurring over a number of months, meaning that it takes time for events such as these to affect borrowers’ ability to repay their loans.

It said this gives the platform time to adjust its processes if there is a higher risk of defaults.