April’s loan origination total of €2,871,397 was slightly less than last month but is mostly in line with the average of the last three months. The concentration of originations is found in the “B” through “D” rated loans. This section of the loans offered total interest rates ranging from 14% to 25% as higher risk ratings generated increasingly aggressive returns.
Loan origination by country
As usual, Estonia continues to lead the group with 74.00% of the total share of originations. Spain and Finland followed at 14.84% and 11.16% respectively. This disproportionate share comes largely from the fact that Estonia has an offering of loans with “AA” through “B” that are nonexistent in the other two countries. Interestingly, Estonia leads by a wide margin even among the “D” rated loans also offered by Finland despite comparable interest rates. Again, part of this difference is likely due to simple supply and demand.
|Share by country – April 2017|
Loan origination by rating
Investors continue to seek a balance between risk and reward. For this reason, the “C” rated loans continue to be the most popular at a total share of 25.30%. These origination numbers also represent the development of the average borrower profile.
As marketplace lending grows in popularity there appear to be fewer borrowers with credit profiles exhibiting the strength necessary to earn an “AA” or “A” rating. In other words, lenders can only support the loans that are made available and fewer borrowers exhibit the responsibility of a high-rated loan. This relationship may also explain why the total share of “HR” loans is relatively high at 15.86% making it the fourth largest portion of the total originations.
- The average “HR” interest rate of 91.01% in Spain and 88.84% in Finland illustrate the higher return investors command for heavier risk.
- Interest rates among identical loan ratings in different countries are largely similar which illustrates that the country of the borrower doesn’t impact the risk measurement.
- The total average interest rate among all countries and all ratings is 35.61%.
|Share by country and rating – April 2017|