Peer2Peer Finance News
The UK's first peer-to-peer finance magazine for investors and the industry
  • Home
  • News
    • Personal Finance News
    • Industry News
    • SME News
    • Global News
  • Property
  • IFISA
    • IFISA Guide
  • Video
  • Open Banking
  • Cryptocurrency
  • Features
    • Joint Ventures and Promoted Content
  • Comment & Analysis
  • What is P2P?
  • Partners
  • Events
    • Past Events
  • P2P Power 50
    • Power 50 2020
    • Power 50 2019
    • Power 50 2018
    • Power 50 2017
  • Sign up to our e-newsletters
  • Magazine
  • Directory
  • Jobs
  • My Account
    • Manage Account
    • Change Password
    • Log In
    • Log Out
shutterstock_280473833
August 22 2017

Zopa scales back higher-risk lending due to UK consumer credit outlook

Kathryn Gaw Industry News, News P2P investors, P2P returns, peer-to-peer consumer lending, Zopa, Zopa Core, Zopa Plus

ZOPA has reduced its exposure to higher-risk loans due to the UK’s worsening consumer credit outlook, which has led it to lower its projected returns on some investments.

The peer-to-peer lender also said that it is expecting slightly higher losses on its existing loans and an increase in early repayments from borrowers.

“Since 2010 the UK has seen continually improving consumer credit performance leading to historically low levels of bad debt,” said Zopa in a blog post on its website on Tuesday.

“In early 2016, we at Zopa started to see some early signs of a possible change in this trend. It now looks like the change is real: publicly available data suggests consumer default and insolvency levels are reaching levels which are more consistent with historic norms prior to 2010; and the Bank of England in their credit conditions survey stated ‘lenders reported that default rates on both credit cards and other unsecured lending to households were reported to have increased significantly in the second quarter [of 2017]’.”

Read more: Metro Bank steers clear of unsecured consumer lending

Zopa said that it had recently reduced the amount of lending in its higher-risk, higher-return tranches that are included in its Plus product and is taking steps to attract more low-risk borrowers.

As a result of increasing the proportion of lower-risk loans, its Plus account will now offer a targeted return of 4.5 per cent for new investments, while the return on its Core account will be lowered to 3.7 per cent.

These accounts previously offered targeted annual returns of 6.1 per cent and 3.9 per cent respectively.

For existing loans, Zopa is expecting slightly higher losses and an increase in early repayments from borrowers, which will reduce investors’ returns.

The company said this would not affect investments protected by the Safeguard fund, which Zopa previously announced is being phased out entirely by 2022.

However, it warned that returns on existing investments in non-Safeguarded loans are likely to be lower than original expectations – 3.5 per cent compared to 3.9 per cent in Core and 5.6 per cent compared to 6.3 per cent in Plus.

Zopa said it will publish a blog post each month giving an overview of changes in the consumer credit market, giving its customers the opportunity to ask questions.

In its annual accounts, published yesterday, Zopa had highlighted concerns around the continued growth of consumer unsecured debt, amid rising inflation.

“The company continues to monitor credit performance and indebtedness trends closely and will act consistently with its prudent approach to credit risk management and responsible lending,” it said.

Dearth of financial education leaves investors unprepared ThinCats plans staggered IFISA roll-out before end of 2017

Related Posts

Dog at school

Industry News, News, Top 3

Five key takeaways from the fintech review

Closed sign

Industry News, News, Property, Top 3

The House Crowd goes into administration

investing

Industry News, News, Top 3

Government urged to modify EIS to promote lending

Popular posts:

  • The House Crowd goes into administration
  • RateSetter to stop investment withdrawals from 26 March
  • UK Finance calls for global fintech cooperation
  • Metro Bank plans to offer RateSetter lending through…
  • RateSetter confident of growing Metro Bank’s…
  • FCA puts the brakes on Buy2Let Cars
Back To Top
  • Home
  • Contact
  • About
  • Team
  • Advertising
  • Subscribe
  • Privacy
  • T&Cs
  • Disclaimer

Follow Us on Social Media

© Peer2Peer Finance News 2020
• Additional design by