Secret Investor: ThinCats predict P2P interest rates and defaults will reduce in 2017

Last post: Jan 12, 2017

The New Year is a time for forecasts and ThinCats predict that both P2P interest rates and defaults will reduce in 2017 – on their site at least. Meanwhile LendingCrowd are the latest to introduce a managed account.

Totals lent to date (12th January 2017)
*All data correct at the time this blog was compiled. Although no blog was published on 29th December, the totals lent by each platform were still updated so that the fortnightly growth amounts would be correct in this edition.

Assetz Capital - £195,138,660
Funding Circle - £1,853,590,147
FundingKnight - £31,485,000
FundingSecure - £87,462,188
Money & Co - £6 million approx
Rebuildingsociety - £10,800,000
ThinCats - £211,446,000
Invest and Fund - £3 million plus
LendingCrowd - £8,485,601
ArchOver - £26,563,000

Zopa - £1,950,000,000
RateSetter – £1,652,138,990
Lending Works – £38,730,328

Assetz Capital  
Lent to Date: £195,138,660 – fortnightly increase of £715,000 – 0.37% growth.
When this blog was compiled, there were 57 upcoming loans with 3 imminently due to be drawndown.
Highlighted Loan: A bridging loan was recently listed on the site to complete the redevelopment of a property near Canterbury as well as to release funds to allow the borrower to progress other projects. Despite a current LTV of 56% plus a Personal Guarantee and debenture, a return of 9% pa was offered to investors which is above average for this platform.
Managed Accounts: The following accounts automatically distribute funds on behalf of investors across the platform's loans and are covered by a Provision Fund:
Quick Access Account (3.75% pa return); 30 Day Access Account (4.25% pa return); Great British Business and Green Energy Income Accounts (both of these offer a return of 7% pa).

Funding Circle
Lent to Date: £1,853,590,147 – fortnightly increase of £29,863,855 – 1.64% growth.
Despite this period covering part of the Festive Period, Funding Circle were still able to raise almost £30 million of capital for their borrowers.
There were 4 auctions ongoing when this blog was compiled.
Secret Investor's Activity: This remains the site which I have the most exposure to because they have the largest number of manually selectable loans.
Below are highlights from my activity pre- and post-Christmas:
Highlighted Loan Invested in:
Expansion Loan of >£125k to a construction business (C risk rating, 13.5% pa return). Suppliers of all things concrete required extra funding as they were branching out into resin bonding. They claimed to be a well-established company and the financial data was positive.
Highlighted Rejected Loan:
Expansion Loan of >£101k requested by clothing retailer (C risk rating, 13.5% return): This business was looking to set up a warehouse to import stock from abroad. Given the weakness of the UK's currency at the moment, this doesn't seem to be a good plan.
Another one to avoid was the C rated loan listed on 3rd January which offered a return of only 7.5% pa! Clearly a member of Funding Circle staff was having a spot of finger trouble on their return to work after the Christmas break as C rated loans should offer much higher returns. Amazingly, despite this clear error and the requests to fix it that had been posted in the Q&A, the loan of just under £70k was 54% funded inside the first hour of its appearance on the site. The auction was later withdrawn.
Defaulted Loans Update: Some good news just before Christmas. The guarantor of a loan which defaulted in April 2014 settled all the debt outstanding against their account. I believe this is my first FundingCircle default which has been resolved in this manner.
But the number of defaulted loans keeps on growing, the latest was to a music club franchise for primary school aged children which has become insolvent. The number of defaults did seem to increase in the latter part of 2016 and, worryingly, in previous years there has been a spike in January.
Another default occurred because the borrower had gone into administration a month ago and has been unresponsive. I had only invested £20 in this business and £9 worth of capital remains outstanding.
No defaults were reported for loans I have invested in today.

Lent to Date: £31,485,000 – fortnightly increase of £215,000 – 0.69% growth.
There were 0 auctions ongoing when this blog was compiled.
Highlighted Loan: The site recently listed a bridging loan – unusual for this platform although not many loans of any sort appear here as this is just the second since September. The borrower ran a care home. The original loan to convert the property to make it suitable for residents was due for repayment but the business hadn't yet established enough of a track record to receive funding from the banks. A total of £215k was required which gave a LTV of 55%. There was a reserve rate of return of 10.69% pa which seems quite healthy as additional security was provided by a debenture.

Lent to Date: £87,462,188 at the end of December. Monthly growth of £7,142,549 (8.89%).
Total updated monthly.
There were 6 auctions ongoing when this blog was compiled.
Highlighted Loan: The site listed a loan of £155k with security provided by a Frank Auerbach painting valued at £300k. This gave a LTV of just over 50% - quite a healthy figure and I was happy to invest for a return of 13% pa.
Defaults: Adding to my list of defaulted loans, one of my borrowers was unable to pay back the interest at the end of the 6 month term. Security was offered via a parcel of development land. However it looks as though a buyer has been found for this already.
The luxury car held as security against another loan which had gone bad was sold just before Christmas allowing that debt to be recovered.
Unfortunately, it is not going to be possible to refinance the loan to the Scottish Boatyard and the receivers have been called in. It looks like it will take some time to resolve that particular default.
Platform News: FundingSecure launched their new website just before Christmas. As well as a cleaner design, enhancements behind the scenes meet FCA requirements for offering an IFISA. One immediate benefit for investors is that listings on the Secondary Market can now be sorted by effective return.

Money & Co
Lent to Date: £6 million approx. (latest available figure)
When this blog was compiled there was 1 auction taking place.
Highlighted Loan: The second loan to "quick sale" house purchasers – which was for £208k – that was added to the site in mid-December took longer than expected to reach its target compared to the first request for funding. The closing date for the auction had to be extended until next Monday, 16th January. It is currently 84% funded.
The lack of interest may be due to the Christmas lull, however their ultimate target of raising £3.4 million via this platform is starting to look ambitious. This is a little surprising as the requirements of the first loan were met almost immediately.

Lent to Date: £10,800,000 – fortnightly increase of £400,000 – 3.85% growth.
There was 1 active auction when this blog was compiled.
Highlighted Loan: Working Capital loan to a flooring company who required £50k to service business growth. Seemed a straight forward proposition although the only security offered was via a personal guarantee making it quite high risk. As a result, returns in the high teens were available…
Defaulted Loan: …but there is a reason why the returns are so high. Despite only investing in a relatively small number of loans via this site, I had my third default today after a building maintenance company was served a winding-up petition. It is sometime since I had deposited fresh capital into this site so I had only invested £10 of repayments from other borrowers assigned in this loan. Of that, £2 had been repaid. The Personal Guarantee was insured so it will be interesting to see how effective that turns out to be.

Lent to Date: £211,446,000 – fortnightly increase of £3,758,000 – 1.81% growth.
It seems to have been a quiet start to 2017 for ThinCats as there were no active auctions when this blog was compiled.
Highlighted Loan: Earlier this week there was a bridging loan for £180k listed to fund the purchase of a bakery. Due to the ill health of the current owner, the business is changing hands with finance for the actual buy-out, as opposed to the bricks and mortar, being raised separately. As the LTV for the bakery was below 50%, the return offered was 7.25% pa which is less than many loans listed and, in my opinion, too low when a Provision Fund covered account which is invested in Bridging and SME Loans at Assetz Capital returns 7% pa.
Platform News: In their pre-Christmas Newsletter, ThinCats predicted that interest rates on their site will reduce in 2017 but so will the number of defaults. This is a result of two factors. Firstly, the banks are getting back their appetite for lending following the 2008 Crash thus increasing the competitiveness of the market. Secondly, ThinCats now check all loans in-house instead of leaving it to brokers therefore, they claim, only the safest borrowers will get the opportunity to raise funds via their platform.

Invest & Fund
Lent to Date: Over £3 million
There were 0 active auctions taking place when this blog was compiled even though before Christmas Invest & Fund claimed that they were heading into the New Year with a pipeline of loans valued at £45 million.

Lent to Date: £8,485,601 – fortnightly increase of £95,000 – 1.13% growth. In the fortnight leading up to Christmas, LendingCrowd allocated over £1/2 million to their borrowers taking their total lent figure through the £8 million mark.
There was 1 active auction taking place when this blog was compiled.
Highlighted Loan: An IT company who provide broadband connections to customers in remote areas of Scotland returned to LendingCrowd to raise £95k to open a new office and expand their geographical footprint. When reviewing their original loan request I had concerns as to whether they would be squeezed out by larger organisations but their market is so niche, it appears that has not been the case and, this time, I decided to invest for a return of 13.25% pa.
Platform News: LendingCrowd will soon be offering investors a managed fund. Their Growth Account will require a minimum investment of £1,000. The target rate of return is 6.5% pa – so that is a target not a guarantee – and there will be a withdrawal fee of 1%. This doesn't compare too well with the managed funds at Assetz Capital which offer a return of 7% pa and are covered by a Provision Fund meanwhile my actively invested funds on this site are providing an annualised return of 9% according to the statistics LendingCrowd provide.

Lent to Date: £26,563,000 – this figure has not been updated since 15th December.
There was 1 auction taking place when this blog was compiled.
Highlighted Loan: Forensic scientists who serve the law enforcement and defence industries returned to ArchOver just before Christmas to refinance their £100k loan for working finance. This seems a very stable business and it was no surprise to see their request fully funded in a matter of days. Investors were offered a return of 6% which is much lower than that available on many sites in this section of the blog however levels of security are much higher due to there being a first, floating charge on the borrower's Accounts Receivable and the loan is also insured.

This platform, which lists loans from multiple sites, only had 4 auctions taking place today and all were from P2P lenders covered elsewhere in this blog. I liked the idea of being able to invest in many platforms from one location but I find the interface on this website so difficult to use and, as it takes so long to move funds around, I have decided to withdraw my funds as repayments come in.

Site was launched in early October.
There was 1 auction taking place when this blog was compiled.
Highlighted Loan: A bridging loan of over £278k to enable a property developer to begin the construction of 12 new homes appeared to be high risk/low return compared to the offeringr on other platforms, most notably FundingSecure. The reason for my concern was because the land being offered as security was valued at £350k giving an LTV of just under 80% and yet investors would only earn 9% pa. In comparison, FundingSecure only list loans that have a maximum LTV of 70% with returns in the low teens. Should building work proceed as planned, a GDV of 65% is forecasted with total borrowing reaching more than £1.1 million (including interest). Already 3 buyers are interested in purchasing the proposed houses while the developer also offers a personal guarantee of £250k.

Lent to Date:  £1.95 Billion – latest figure available.
Returns: Zopa's 3 accounts offer returns of 3.1%, 3.9% and 6.3% pa depending on the levels of access and whether or not they are covered by the Provision Fund.
Zopa distribute investor's money mostly to unsecured consumer loans.

Lent to Date: £1,652,138,990 – fortnightly increase of £25,642,456 – 1.58% growth.
Returns: Interest rates are set according to supply and demand. They currently range from 2.9% to 4.5% depending on the length of the investment. These have increased and reduced by 0.1% respectively over the past fortnight.
Capital is covered by a Provision Fund. Ratesetter proudly boast that no investor has lost a penny since they launched in 2010.

Lending Works
Lent to Date: £38,730,328
Returns: 4.0% and 4.7% for 3 and 5 year investments respectively. These figures have increased by 0.6% and 0.1% over the past fortnight.
As well as a Provision Fund to cover investor's finances, this site also insures borrowers against redundancy, fraud, illness and accidents making this a very fair site for all concerned.
Platform News: Lending Works have launched their swish new website.

****Disclaimer: This blog contains the views of the Secret Investor. Your capital is at risk when lending via all P2P Platforms. You're recommended to speak to a qualified Independent Financial Advisor.