|
|
Post by Matthew on Dec 12, 2018 13:09:50 GMT
Matthew , thank you for your reply (on another thread), I was hoping for a clarification on the difference between Actual arrears rate and Actual lifetime bad debt rate (to date). If you could refer to the 2016 cohort I would appreciate it. (Or if anyone else can point me to an explanation that would be good.) , anyone? Apologies bigfoot12Actual arrears rate is the balance outstanding on loans which are currently 45 days or more overdue. Actual lifetime bad debt rate is the lifetime (not annualised) loss rate based on the balance outstanding on loans which are currently 120 days or more overdue, or those that have already been defaulted. So the arrears rate relates to early arrears whereas the bad debt rate relates to late stage arrears and actual defaults. Hope this helps.
|
|
bigfoot12
Member of DD Central
Posts: 1,817
Likes: 816
|
Post by bigfoot12 on Dec 12, 2018 13:21:31 GMT
Apologies bigfoot12 Actual arrears rate is the balance outstanding on loans which are currently 45 days or more overdue. Actual lifetime bad debt rate is the lifetime (not annualised) loss rate based on the balance outstanding on loans which are currently 120 days or more overdue, or those that have already been defaulted. So the arrears rate relates to early arrears whereas the bad debt rate relates to late stage arrears and actual defaults. Hope this helps. So when a loan goes over 120 days overdue, or into default does it stop being in arrears?
|
|
|
|
Post by Matthew on Dec 12, 2018 13:38:59 GMT
Apologies bigfoot12 Actual arrears rate is the balance outstanding on loans which are currently 45 days or more overdue. Actual lifetime bad debt rate is the lifetime (not annualised) loss rate based on the balance outstanding on loans which are currently 120 days or more overdue, or those that have already been defaulted. So the arrears rate relates to early arrears whereas the bad debt rate relates to late stage arrears and actual defaults. Hope this helps. So when a loan goes over 120 days overdue, or into default does it stop being in arrears? Yes - it should only be balances 45-119 days within ‘arrears’, and anything 120+ days would be recognised as a ‘default’, in line with P2PFA definitions (there is no current standard regulatory definition of default, though that may well change with the FCA Handbook changes coming from their review of the current rules).
|
|
dandy
Posts: 427 
Likes: 341
|
Post by dandy on Dec 12, 2018 13:55:42 GMT
So when a loan goes over 120 days overdue, or into default does it stop being in arrears? Yes - it should only be balances 45-119 days within ‘arrears’, and anything 120+ days would be recognised as a ‘default’, in line with P2PFA definitions (there is no current standard regulatory definition of default, though that may well change with the FCA Handbook changes coming from their review of the current rules). How about "in line with the loan agreements"? What statistics would that show? A loan agreement is a contract between two (or more) parties. All loan agreements worth the paper they are written on do have defined "events of default" (and non-payment of interest/capital when due is always included). Whether the FCA or anyone else have their own definitions is really not the point. So if the borrower is in breach of the loan agreement then the loan is in default! Right? Waiting 120 days for a duck to be called a duck is, frankly, ridiculous. Not aimed at lending works specifically who I haven't used (yet). So just another general rant 
|
|
bigfoot12
Member of DD Central
Posts: 1,817
Likes: 816
|
Post by bigfoot12 on Dec 12, 2018 17:14:17 GMT
So when a loan goes over 120 days overdue, or into default does it stop being in arrears? Yes - it should only be balances 45-119 days within ‘arrears’, and anything 120+ days would be recognised as a ‘default’, in line with P2PFA definitions (there is no current standard regulatory definition of default, though that may well change with the FCA Handbook changes coming from their review of the current rules). Thanks I understand now; maybe that info should be on the Statistics page somewhere. How about "in line with the loan agreements"? What statistics would that show? A loan agreement is a contract between two (or more) parties. All loan agreements worth the paper they are written on do have defined "events of default" (and non-payment of interest/capital when due is always included). Whether the FCA or anyone else have their own definitions is really not the point. So if the borrower is in breach of the loan agreement then the loan is in default! Right? Waiting 120 days for a duck to be called a duck is, frankly, ridiculous. Not aimed at lending works specifically who I haven't used (yet). So just another general rant Not sure that would be very helpful. Ts&Cs change and then one year wouldn't be comparable with another year. It is possible that different types of loan or categories of borrower have different terms and conditions. Also I'm not sure that a temporary spike in arrears because NatWest or some other bank has IT problems is very insightful. 45 days seems somewhat arbitrary, but not unreasonable. I would be very pleased to see some sort of harmonising of reporting across platforms.
|
|
|
|
Post by propman on Dec 13, 2018 12:14:35 GMT
At thwe end of the day it is semantics to those that understand the data. "Default" is used to have the specific meaning that it is considered that additional action is required to obtain recovery and there is a likelihood of a significant proportion being irrecoverable and possibly 100%. The amount quoted is thus the entire loans on which the arrears arose Arrears are those where there is an expectation that a significant proportion of those in this category will go on to repay their loans. Importantly the numbers quoted are the payments in arrears ie in most cases this is a small proportion of the underlying loans that may be at risk. Importantly it is generally only loans in default at the tax year end that are tax deductible.
|
|
benaj
Member of DD Central
N/A
Posts: 5,591
Likes: 1,735
|
Post by benaj on Dec 15, 2018 14:17:21 GMT
I am a happy lender so far @ lending works. This morning, I had a dig into the nitty gritty of every loanI wish I someone could tell me why some loans are not covered by "Shield" and there's no record of interest received in the loan book. |
|
bigfoot12
Member of DD Central
Posts: 1,817
Likes: 816
|
Post by bigfoot12 on Dec 15, 2018 14:42:53 GMT
I am a happy lender so far @ lending works. This morning, I had a dig into the nitty gritty of every loanI wish I someone could tell me why some loans are not covered by "Shield" and there's no record of interest received in the loan book. Loans not covered by shield are loans made by some sort of institution. Edit: If you do any analysis you should strip these out.
|
|
benaj
Member of DD Central
N/A
Posts: 5,591
Likes: 1,735
|
Post by benaj on Dec 15, 2018 14:46:53 GMT
I am not expert in stats, but it seems the Weighted average APR 10.3% is just enough to cover estimated lifetime bad debt (3.8%) and investor rate.
|
|
dandy
Posts: 427
Likes: 341
|
Post by dandy on Dec 18, 2018 10:18:11 GMT
How about "in line with the loan agreements"? What statistics would that show? A loan agreement is a contract between two (or more) parties. All loan agreements worth the paper they are written on do have defined "events of default" (and non-payment of interest/capital when due is always included). Whether the FCA or anyone else have their own definitions is really not the point. So if the borrower is in breach of the loan agreement then the loan is in default! Right? Waiting 120 days for a duck to be called a duck is, frankly, ridiculous. Not aimed at lending works specifically who I haven't used (yet). So just another general rant Not sure that would be very helpful. Ts&Cs change and then one year wouldn't be comparable with another year. It is possible that different types of loan or categories of borrower have different terms and conditions. Also I'm not sure that a temporary spike in arrears because NatWest or some other bank has IT problems is very insightful. 45 days seems somewhat arbitrary, but not unreasonable. I would be very pleased to see some sort of harmonising of reporting across platforms. There would always be an allowance period of 7-14 days for late payments to come in - so IT glitches or other minor issues wont mean immediate default anyway. Just saying that a default is a default so calling it something else is totally incorrect. If it is more helpful to have 45/90/180 days late reflected for stats purposes that it fine but then the stats should say that. The way it currently is, one could mistakenly assume that all loan repayments are up to date unless showing as defaulted - which is clearly not the case. IMO 90 days late should be considered well beyond 'default' stage and into bad debt territory
|
|
r00lish67
Member of DD Central
Posts: 2,692
Likes: 4,048
|
Post by r00lish67 on May 23, 2019 8:29:34 GMT
This is perhaps one for Matthew (but all views welcome of course) Looking at the latest LW stats, at the 'Forecast lifetime bad debt rate (projection)' row in particular. This is LW's regularly updated view of each year's default rate (less recoveries). Here they are for recent years, with their corresponding year loan APR's: For 2017 this is 6.5%, with an avg. loan APR of 9.7% For 2018 this is 5.2%, with an avg. loan APR of 12.1% For 2019 this is 4.9%, with an avg. loan APR of 14.4% The default rate is obviously going to be increasingly accurate as months go by and reality plays out. So, my question - What that says to me is that LW believe they have found borrowers in 2019 who, on average, are willing to pay interest rates nearly 50% higher than 2 years ago (14.4% vs 9.7%) that are nonetheless going to default on average 25% less. (4.9/6.5) On the face of it, that sounds difficult to buy into. If that interpretation is fair (I may have misunderstood something), then how is that expected to be achieved? |
|
|
|
Post by propman on May 23, 2019 13:40:29 GMT
This is perhaps one for Matthew (but all views welcome of course) Looking at the latest LW stats, at the 'Forecast lifetime bad debt rate (projection)' row in particular. This is LW's regularly updated view of each year's default rate (less recoveries). Here they are for recent years, with their corresponding year loan APR's: For 2017 this is 6.5%, with an avg. loan APR of 9.7% For 2018 this is 5.2%, with an avg. loan APR of 12.1% For 2019 this is 4.9%, with an avg. loan APR of 14.4% The default rate is obviously going to be increasingly accurate as months go by and reality plays out. So, my question - What that says to me is that LW believe they have found borrowers in 2019 who, on average, are willing to pay interest rates nearly 50% higher than 2 years ago (14.4% vs 9.7%) that are nonetheless going to default on average 25% less. (4.9/6.5) On the face of it, that sounds difficult to buy into. If that interpretation is fair (I may have misunderstood something), then how is that expected to be achieved? As I have said too often on RS Board, I am also cynical of projections.
I am glad to see that contributions to the Shield appear to have been substantially increased in 2018 relative to 2017 and in 2017 relative to 2016.
As the approximate contributions as proportion of loans increased from 2016 to 2018 from 2.2% to 4.7% to 7.6%.
|
|
r00lish67
Member of DD Central
Posts: 2,692
Likes: 4,048
|
Post by r00lish67 on May 23, 2019 14:05:56 GMT
This is perhaps one for Matthew (but all views welcome of course) Looking at the latest LW stats, at the 'Forecast lifetime bad debt rate (projection)' row in particular. This is LW's regularly updated view of each year's default rate (less recoveries). Here they are for recent years, with their corresponding year loan APR's: For 2017 this is 6.5%, with an avg. loan APR of 9.7% For 2018 this is 5.2%, with an avg. loan APR of 12.1% For 2019 this is 4.9%, with an avg. loan APR of 14.4% The default rate is obviously going to be increasingly accurate as months go by and reality plays out. So, my question - What that says to me is that LW believe they have found borrowers in 2019 who, on average, are willing to pay interest rates nearly 50% higher than 2 years ago (14.4% vs 9.7%) that are nonetheless going to default on average 25% less. (4.9/6.5) On the face of it, that sounds difficult to buy into. If that interpretation is fair (I may have misunderstood something), then how is that expected to be achieved? As I have said too often on RS Board, I am also cynical of projections.
I am glad to see that contributions to the Shield appear to have been substantially increased in 2018 relative to 2017 and in 2017 relative to 2016.
As the approximate contributions as proportion of loans increased from 2016 to 2018 from 2.2% to 4.7% to 7.6%.
Where do you get those numbers from propman ? As I see it on their page under 'shield utilisation actual' , 2016 used up 250% of the shield contributions for the year (i.e. it lost 2.5x more than borrowers put in), 2017 is at 116.9%, and 2018 is at 26.2% (but obvs it's too early to tell whether that's good or bad for that year). So whether or not they are increasing contributions, that's obviously only 1 side of the equation - and if those contributions are being more than consumed year-by-year, then I'm not sure that much cheer can be gained from an increasing + column ..?
|
|
|
|
Post by propman on May 24, 2019 11:13:14 GMT
As I have said too often on RS Board, I am also cynical of projections.
I am glad to see that contributions to the Shield appear to have been substantially increased in 2018 relative to 2017 and in 2017 relative to 2016.
As the approximate contributions as proportion of loans increased from 2016 to 2018 from 2.2% to 4.7% to 7.6%.
Where do you get those numbers from propman ? As I see it on their page under 'shield utilisation actual' , 2016 used up 250% of the shield contributions for the year (i.e. it lost 2.5x more than borrowers put in), 2017 is at 116.9%, and 2018 is at 26.2% (but obvs it's too early to tell whether that's good or bad for that year). So whether or not they are increasing contributions, that's obviously only 1 side of the equation - and if those contributions are being more than consumed year-by-year, then I'm not sure that much cheer can be gained from an increasing + column ..? My estimates are from taking the % defaults and dividing by the % use of the shield. Unfortunately this method doesn't give a resonable basis for knowing what is being contributed to the SHield in 2019.
I agree the defaults are somewhat worrying, but the response is much earlier and more extensive than RS who were very slow to raise contributions significantly when they started hitting increased defaults from 2013 and are still playing catch up (much of the 2018 contribution is required to meet defaults from earlier years with the "buffer" of the excess of the fund over the expected defaults dependent on bad debt estimates in 2018 & 2019. LW is similar on the latter, but the response suggests that it is not taking 5 years to react to the situation.
- PM
The
|
|
|
|
Post by albermarle on May 24, 2019 18:09:23 GMT
I posted the following 6 months ago, and following the latest statistics detailed by Roolish , the situation seems not to be improving:
According to Moneyfacts website today , they say the average rate for a £5000 unsecured personal loan over 3 years is 6.8% and for 5 years 4.8%. Whilst the lowest rates for the most credit worthy borrowers are 3.4% and 2.8% respectively.
So it does not stack up that LW are apparently only lending to A+ prime borrowers but charging nearly 12 % …...
|
|
