The Money Platform reports lower than forecast defaults
Peer-to-peer lender The Money Platform has reported lower than forecast default rates for the 12 months ending 31 January 2022.
In May of this year, the platform forecast an annualised default rate of 7.8 per cent. However, by August that forecast had been revised downwards, to 7.1 per cent.
For the 12 months ending 31 January 2023, The Money Platform has predicted that the default rate will drop again, to seven per cent.
Meanwhile, the level of delinquent loans is also expected to fall next year, from 11.1 per cent in August 2022, to 10.5 per cent by the end of January 2023.
This is due to the lender tightening its credit checking processes and emerging from the uncertainty of the Covid-19 pandemic.
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The lender has also forecast average annualised returns of between 5.5 and 6.3 per cent for the upcoming year. This is an improvement on the 4.6 to 5.2 per cent average returns reported during the 12 months ending 31 January 2022.
“These forecast returns reflect an expected improvement on the actual returns realised in 2021-22,” said a spokesperson for The Money Platform, in the company’s latest Outcomes Statement.
“Over the course of the last year we have continued to improve our scoring and customer sourcing, tightened our affordability criteria.
“We do not expect to see the same extent of turbulence experienced during the exit from the Covid-19 restrictions.
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“The macroeconomic situation faced by our borrowers will be challenging over 2022-23 as high inflation erodes consumer purchasing power and interest rates rise.
“These macro-economic factors will result in fewer customers passing our affordability checks, which we have already tightened in light of the crisis.”
The Money Platform added that any deviation from these macro-economic assumptions – for example, the UK entering a recession – could result in higher levels of defaulted or delinquent loans.
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