The Anonymous Widower

Is Zopa Getting Too Popular With Lenders?

I keep fairly detailed statistics of my lending on Zopa, so I am able to discern trends fairly quickly.  I usually set my rate so that money will be lent out at a Medium speed, which usually means that I lend at a rate between of 7 and 8 percent, with a very low risk of default. Out of the well over 2,000 contracts I’ve lent, only three have gone to default, which is a default rate of just 0.13% by contracts and 0.07% in terms of money.

So I think I’ve got a safe philosophy.  But who knows?

However, there is a trend that has started to be noticeable this month.

Zopa allows you to find how much money is wanted by clients and how much is available at all times.  Obviously to get a good lending speed to clients, the amount of money on offer should be higher than that demanded. At the start of the month the ratio of Money Offered over Demand was about 2, but it has since risen to over 3.

The reason is obvious as in that time the money on offer has risen from about £15M to £20M.

As every action has an equal and opposite reaction, the extra money has forced the rates that borrowed have to pay down by about half a percent.

So I am now not getting as good a return as I was in the past. But I’m not bothered as the money is much safer than it was in an Icelandic Bank and my returns overall are upwards of five percent, which is above the High Street.

I think though the corollary of this, is that if you need a few thousand to buy a car and you have a good credit rating, then Zopa will be a better place to borrow.

Don’t believe me, but read this article in the Daily Mail about a lady, who wanted £5,000 for a car!

November 20, 2010 - Posted by AnonW | Finance | Banks, Zopa