RateSetter is taking a cautious approach towards managing its lending volumes, as the Covid-19 pandemic has hit consumer lending hard.
The ‘big three’ peer-to-peer lending platform – which is in talks to be acquired by Metro Bank – has seen a reduction in consumer lending volumes.
The platform’s customers tend to borrow for a specific reason such as a major purchase like a car, or a home improvement project. The Covid-19 induced lockdown has resulted in fewer people making these kinds of purchases, so the consumer finance market has contracted commensurately.
The Finance and Leasing Association recently reported that lending volumes were down by more than 60 per cent in April 2020 compared to April last year.
Because of the effect of Covid-19, RateSetter has tightened its lending criteria to favour homeowners and customers with greater affordability and creditworthiness.
“Lending volumes depend on the supply of funds and demand for finance from creditworthy consumers,” said Anna Decoudu, RateSetter’s head of consumer finance.
“Our aim is to identify the right opportunities to generate a healthy return for investors at an acceptable level of risk, so we control credit quality and lending volumes very carefully, and in an environment with increased uncertainty, we will be cautious with managing our lending volumes.”
Despite the current economic uncertainty, RateSetter added that consumer finance is a resilient and a consistently strong-performing asset class, and with appropriate management the risk-return balance for investors is very attractive.
“This is, after all, precisely why banks have invested in consumer loans for so long – but now, finally, everyone is able to enjoy access to this asset class,” Decoudu said.
“I am sure that consumer finance has a strong role to play in the future as the RateSetter platform continues to grow and generate attractive opportunities for investors.”