Loan Performance

Defaults and Losses

When you invest in loans, there is always a possibility that some of them won't be paid back on time (Default) or you might lose money (a Loss). Our Credit Risk page contains information on how Defaults are defined.

To help you manage your risk, the table below shows Defaults and Losses levels in the loan portfolio.

It is important to note that a Default does not necessarily mean that there will be a Loss. We take asset security on loans which, if the borrower can’t pay back the loan, can be enforced to sell the asset to get back some or all of the money they owe you. Also, we operate discretionary Provision Funds for most of our Investment Accounts to help cover any Defaults and Losses but they could become depleted so we can’t guarantee that there will never be a loss.

We have reviewed our credit risk model and how we publish our Defaults & Losses in light of FCA Policy Statement 19/14. Due to changes to our credit risk model the Defaults and Losses information we report is not directly comparable to the Defaults and Losses information we reported before 9 December 2019.

The Provision Funds we offer do not give you a right to a payment so you may not receive a pay-out even if you suffer loss. The funds have absolute discretion as to the amount that may be paid, including making no payment at all. Therefore, investors should not rely on possible pay-outs from the Provision Funds when considering whether or how much to invest.

Please see also our Provision Fund policy

The figures are shown as percentages of the total amounts of loans originated in each calendar year.

  2013 2014 2015 2016 2017 2018 2019

For All Loan Types offered to Borrowers

1. LOANS ORIGINATED £9,195,745 £38,054,022 £26,357,578 £101,120,427 £210,636,113 £300,502,496 £224,798,766

The total amount of loans originated in each calendar year.

2. INTEREST RATE 12.5% 11.7% 10.5% 9.1% 7.5% 7.6% 7.3%

This is the annual interest rate due to lenders, before any losses, if they had diversified (spread) their investment perfectly across all loans originated in the year in question (with the investment spread proportionately across the total amount originated on all loans). Investors in Investment Accounts with capped interest rates would not have received these interest rates. These rates are not a guide to interest paid to any individual investor either in the past or in the future.

3. ACTUAL DEFAULT RATE 53.4% 33.4% 14.1% 32.0% 9.7% 0.8% 1.2%

The sum of loans originated in a calendar year with a risk category marked Default divided by the total Loans Originated in that calendar year. This reflects defaults that arise at any time over the life of a loan and is not an annualised figure.

4. EXPECTED DEFAULT RATE 0.0% 0.0% 0.0% 2.9% 3.8% 5.7% 6.6%

The expected default amount on the unrealised balance of loans originated as a percentage of the total amount of loans originated in each calendar year. The expected default amount is based on an average of the Probability of Default assessed at 31 October 2019 on unrealised loans weighted by principal loan balance outstanding on them.

Please Note: Our Credit Risk model used to determine Probability of Default has changed. All loans have been assessed using the revised model as at 31 October 2019 and that information is reported above on the unrealised balance of loans at that date but taking account of the total amount of loans originated in a year. For loans originated after 31 October 2019, the revised Probability of Default method will be used to assess an Expected Default Rate based on the total amount of those loans at origination– to be published once available.

This information is not directly comparable with information contained in our previous Defaults and Losses page. Should you need to access the last previously reported Expected Default Rate based on our old Probability of Default method please do so here.

5. CURRENT ACTUAL LOSS RATE 6.1% 9.4% 2.0% 3.1% 2.6% 0.0% 0.1%

The sum of the actual and estimated loss on loans originated in a calendar year with a risk category marked Default divided by the total loans originated in that calendar year. This reflects losses that arise at any time over the life of a loan and is not an annualised figure.

6. LOANS REALISED 100% 100% 96% 70% 75% 39% 7%

The proportion of total loans originated in a calendar year which have now been repaid or are included as Current Actual Losses (not now expected to be repaid).

Please Note: These figures include Defaults and Losses for loan types we have discontinued: (a) Renewable energy loans and (b) Secured SME term loans not secured by a first charge on a property.

For Current Loan Types Offered To Borrowers

(Note: these figures do not include loan types that have been discontinued – data including discontinued loan types is shown in the All Loan Types Section below)

  2013 2014 2015 2016 2017 2018 2019
1. LOANS ORIGINATED £6,071,745 £21,590,522 £20,387,078 £79,947,627 £200,480,738 £299,902,496 £224,278,766

The total amount of loans originated in each calendar year.

2. INTEREST RATE 13% 12.7% 10.4% 9.0% 7.4% 7.6% 7.3%

This is the annual interest rate due to lenders, before any losses, if they had diversified (spread) their investment perfectly across all loans originated in the year in question (with the investment spread proportionately across the total amount originated on all loans). Investors in Investment Accounts with capped interest rates would not have received these interest rates. These rates are not a guide to interest paid to any individual investor either in the past or in the future.

3. ACTUAL DEFAULT RATE 62.1% 46.7% 13.5% 37.6% 7.2% 0.8% 1.2%

The sum of loans originated in a calendar year with a risk category marked Default divided by the total Loans Originated in that calendar year. This reflects defaults that arise at any time over the life of a loan and is not an annualised figure.

4. EXPECTED DEFAULT RATE 0.0% 0.0% 0.0% 2.5% 3.7% 5.7% 6.6%

The expected default amount on the unrealised balance of loans originated as a percentage of the total amount of loans originated in each calendar year. The expected default amount is based on an average of the Probability of Default assessed at 31 October 2019 on unrealised loans weighted by principal loan balance outstanding on them.

Please Note: Our Credit Risk model used to determine Probability of Default has changed. All loans have been assessed using the revised model as at 31 October 2019 and that information is reported above on the unrealised balance of loans at that date but taking account of the total amount of loans originated in a year. For loans originated after 31 October 2019, the revised Probability of Default method will be used to assess an Expected Default Rate based on the total amount of those loans at origination– to be published once available.

This information is not directly comparable with information contained in our previous Defaults and Losses page. Should you need to access the last previously reported Expected Default Rate based on our old Probability of Default method please do so here.

5. CURRENT ACTUAL LOSS RATE 5.5% 6.7% 0.0% 3.8% 0.6% 0.0% 0.1%

The sum of the actual and estimated loss on loans originated in a calendar year with a risk category marked Default divided by the total loans originated in that calendar year. This reflects losses that arise at any time over the life of a loan and is not an annualised figure.

6. LOANS REALISED 100% 100% 97% 73% 76% 39% 7%

The proportion of total loans originated in a calendar year which have now been repaid or are included as Current Actual Losses (not now expected to be repaid).

This table was last updated on 9 December 2019.

Outcomes Statement

To help you monitor the performance of the loan portfolio, we will publish an Outcomes Statement to show the expected and actual default rate of all loans originated within a financial year by reference to risk categories. It will also show the actual return against any target rate offered.

An Outcomes Statement must be published within four months of the end of each financial year. Our financial year ends on 31 March so we will publish our first Outcomes Statement by 31 July 2020.