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Peer2Peer Finance News | August 18, 2019

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Defaults rise “significantly” on unsecured loans in first quarter of 2019

Defaults rise “significantly” on unsecured loans in first quarter of 2019
Kathryn Gaw

DEFAULT rates on unsecured loans increased “significantly” in the first quarter of 2019, according to the latest Bank of England credit conditions survey.

The rising default rate was largely driven by missed credit card payments among consumers and businesses.

Lenders who were surveyed told the Bank of England that they expect unsecured loan defaults to decline slightly in the second quarter.

Read more: Crowd2Fund reduces default rate using AI

Looking specifically at business lending, default rates on loans to small firms increased slightly in the first quarter, while they remained unchanged for medium‑sized businesses and increased for large businesses. Default rates are expected to increase among all business borrowers in the second quarter, but less for small businesses than their larger counterparts.

Read more: FundingSecure toughens stance on defaults

“It’s a concern that default rates rose slightly for small businesses in the first quarter and that lenders expect them to increase further between April and June,” said Mark Collings, chief commercial officer of the debt finance platform CODE Investing.

“Some will quickly point to Brexit uncertainty but the economy, for now at least, is on a relatively strong footing and so the hope is that the uptick in default rates is a natural ebb and flow.

“What’s critical in the current climate is that businesses seeking finance get it at the right price and from the right sources, providers that genuinely understand their clients’ needs in both the short and long term.”

Read more: Zopa maintains credit policy as it revises default expectations