FUNDING Circle is increasing the interest rates and risk ratings of some of its property loans, after reviewing its credit assessment models.
The peer-to-peer lender assesses and prices all of its property loans on an individual basis. It said that a property loan with a loan-to-value ratio at the highest end of its criteria previously would have been listed with an ‘A’ risk band – indicating Funding Circle’s second-lowest level of risk.
However, these loans may now be listed as higher risk, typically under the ‘B’ band. Depending on the overall assessment of the project, the loan may now have a higher interest rate as well.
“Over the past three years, you have lent over £300m to experienced property professionals, earning over £16m in interest after fees and bad debt,” said Funding Circle.
“This has provided us with an ever-growing source of property credit performance data, which we use to regularly review our credit assessment models and help us make even more accurate pricing and risk banding decisions.”
Funding Circle, which is the UK’s third-largest lender to small businesses, said it is not widening its assessment criteria and there are no changes to its estimated loss rates for property loans. “We expect all new property loans to perform as well as A+ and A loans in current market conditions,” it said.
These changes will only apply to new loans listed on the marketplace and will not affect existing loans.
Funding Circle regularly reviews its rates and risk models. Last October, the platform altered its UK fixed-interest rates, lowering the cost of borrowing for lower-risk loans and raising the cost for higher-risk ones. Those changes did not apply to property loans, as they are priced individually.
Earlier this month, Funding Circle announced that it has raised a further $100m (£79m) from existing equity investors, which was heralded as “further evidence of the growing importance of [British fintech]” by Chancellor Philip Hammond.