Explore P2P have published a deep dive article looking into $EstateGuru
- Looking at the loan book since 2014, borrowers have repaid just over half of the loans. 37% of loans are in good standing. The rest are late, in default, or went through a recovery process.
- Business loans seem more likely to default:
While the % of balances repaid is fairly similar across the three types of loans, a much higher percentage of the remaining business loan balances have a late status or are in default. 5% of loans have also been through a recovery process.
- Loan size and LTV are poor predictors of whether a loan will default:
It is surprising to see no correlation at all between loan size, LTV and the probability of a loan becoming delinquent. The only pocket of loans that had very low levels of delinquency were the low ultra-low LTV loans (below 25% LTV).
This tells us two things. First, even fairly low LTV loans can still run late or default – borrowers may run out of funds even if they have equity value in the collateral property, and no refinance options. Second, larger loans don’t appear to be riskier – the probability of default appears to be fairly consistent across all loan sizes.
- Latvia and Finland loans have had higher levels of default:
Lithuania and Estonia have similar levels of performance, when we consider the total proportion of loans that are in late, defaulted and recovered states. Latvian loans have significantly underperformed in comparison, with 10% of loans currently in default. Finland however, is the country that appears to be causing real problems for Estateguru, with 13% in default and a further 15% late.
- Recovery rates have been excellent so far:
Most investors have received between 105 – 125% recoveries. This is an extremely impressive track record. Only one loan has recorded a loss (of 10%). Recovery rates are fairly consistent across all loan sizes.
- 10-15% of loans have been defaulting:
We can see that default rates were very low from 2014-2016, but have increased quite significantly over 2017-2019 to between 10-15%. We expect that the 2019 default rate will continue to increase and will end up similar to the 2018 level. What about 2020? It’s too early to estimate a likely default rate for loans issued last year. We know that 3% of loans have already defaulted and a further 9% are in a ‘late’ status. It seems likely that default levels will end up similar to 2017-2019 levels.