Lending Works removes negative interest rates on two more cohorts
Lending Works has removed negative interest rates on another two of its cohorts and said that overall expected annual losses have remained stable at around four per cent.
The peer-to-peer lending platform said in the fourth quarter of last year both expected annual returns and expected annual loss rates have remained relatively stable. Predicted annual losses have been updated after the P2P lender continued to monitor the impact of the pandemic on its borrowers.
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Lending Works said negative interest rates are no longer required for the 2017 and 2018 cohorts, while interest rate diversions to the ‘Shield’ fund will continue to be applied to 2019 and earlier cohorts. The 2020 and 2021 cohorts will continue to pay the target rate of interest, the platform added.
The P2P lender said the average expected annual return on the 2014 to 2019 cohorts has remained stable at approximately 4.3 per cent per annum for growth investments and 3.7 per cent per annum for flexible.
Per annum, average returns are 2.6 per cent and 4.5 per cent for growth in the 2020 cohort and 1.9 per cent and four per cent for flexible accounts, which the platform said is stable compared to the third quarter last year.
Lending Works said the future income required to cover expected losses dropped from £3.4m in the third quarter of last year to £2.2m in the fourth quarter, to reflect the most recent performance of the portfolio and the platform’s latest assessment of the expected credit losses in its portfolio.
Read more: Lending Works narrowed losses last year ahead of P2P exit
Read more: Lending Works’ history in P2P
“We believe prudence continues to be sensible as the full impacts of the new omicron variant on the UK economy are understood,” Lending Works said in a blog on its website.
“That said, if the measures we have taken are overly prudent, the lender rate adjustment mechanism will be used to increase expected annual returns received by investors over the lifetime of the loans in their portfolios.
“We will continue to do quarterly performance updates on the active portfolio to all our retail investors.”
In December, Lending Works placed its P2P lending business into run-off, citing changing market dynamics, the pandemic and waning retail interest.