Rob McCorquodale


3 thoughts on “Introducing the Innovative Finance ISA | Weekly Lending Review

  1. It’s good to see some data on the volume of loan parts available, but the way it is currently presented obscures much of the value because loans in all risk categories are combined in columns without regard to expected defaults. If the same chart was displayed but showing buyer rate minus expected defaults rather than raw buyer rate it would facilitate comparison of the markets for each of the categories.

    • Altair
      Some facts on rates (but not volumes, sorry I can’t easily do that).

      Following shows for each rate band
      -minimum bid allowed
      -average gross rate achieved from last 20 loans (Statistics page)
      -expected rate from last 20 loans (from gross rate allowing for fees and expected bad debt)

      A+ 6% min, 8.4% gross, 6.8% expected
      A 8%, 9.8%, 7.3%
      B 9%, 10.5%, 7.2%
      C 10.2%, 11.3%, 7.0%
      D 12.2%, 13.2%, 7.2%
      E 18.2%, 18.2%, 9.2%

      Can clearly see
      -bands A+ to D have expected rate 7.0% plus/minus 0.3%
      -band E has expected rate 9.2%, on average about 2% higher than expected rate of every other band

      To me, this shows band E minimum bid rate is about 2% too high. Investors consistently show by their bids on all other bands they’ll accept approx. 7% expected return. They don’t demand expected return of 9.2%. Neither do they demonstrate they need a higher expected return for higher risk loans.

      I would suggest the risk E minimum bid being 2% too high is why every single risk E loan has closed at minimum rates, they’re basically giving it away. Some E loans have closed in less than 10 minutes.

      I find it disappointing that FC don’t accept this. They’re in danger of becoming “just another financial organisation” that’s not committed to fair play to all parties – themselves, lenders AND borrowers.

      If FC lowered the risk E minimum to (say) 16%, lenders would determine what they considered a fair expected return would be.

    • Hello. Thank you for getting in touch and for your suggestion. We’ll look into how we can better display our graphs. Antonia

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