Publication Date: May 2025
How are Default and Delinquency rates defined?
Delinquency rates are those loans that are overdue at least one repayment, expressed as a percentage of the amount lent in the year. Default rates are the percentage of the amount lent in the year which is considered unrecoverable following our Collections efforts. For the ‘Actual’ results published, all loans have passed their final payment date at the date of publication and our Collection activities continue to collect further repayments on loans, for example customers on payment plans, and as a result our Default and Delinquency Rates improve over time, and so does the Lender IRR.
What is the expected cash flow return profile of The Money Platform’s loans?
Our target is for a monthly loan cohort as a whole to have broken even by 3 months after the maturity date (e.g. a 12 month loans issued on 1st May 2025 are targeted to reach IRR break even (0% return) by August 2026), and to reach Forecast IRR 6 months after that (i.e. 9 months after the loan maturity date). The First published Actual annualised return for the year ended 31 January 2025 (our company year end) above includes months that are several months passed their maturity date (e.g. February 2025) and months that have only recently matured (e.g. January 2025). From 2024-25 onwards we have analysed cohorts by their maturity date, rather than loan start date. This ensures we can include all loans that should have repaid within the period. Prior to 2024-25 we have continued to analyse based on loan start date.
2024-25 Actual Returns (as at May 2025)
Returns in 2024-25 were ahead of expectations with a Gross Return (after losses and fees) now at 29.9% (May 2025). This is ahead of the last three years at the same point and we should, as collections activity takes place, see returns significantly exceed the forecast for 2024-25.
This was largely driven by a lower than expected Default rate of 4.9%, whilst the Delinquency rate was slightly higher than forecast at 14.2%. This reflects our continuous efforts to proactively work with customers to help them manage their loan with us, even when in difficulty. As we have expanded into the ‘Mid Prime’ segment we have seen higher engagement during the collections process and as a result defaults reduce.
Over the past year we have continued to iteratively upgrade our credit decision tools and importantly rebuilt our payment infrastructure, enhancing them with new payment methods including open banking payments. This has reduced payment friction - a key cause of delayed payments which can then lead to arrears.
We continued to roll out our ‘Mid Prime’ longer duration loan product, and these loans are included in our returns analysis shown here.
2023-24 Updated Returns (as at May 2025)
Returns in 2023-24 were ahead of expectations with a Gross Return (after losses and fees) now at 44.7% (May 2025). This is ahead of the last two years at the same point and we should, as collections activity takes place, see returns significantly exceed the forecast for 2023-24.
One important continued reason for outperformance is improved credit decisioning tools we have developed and utilised, resulting in only the very best borrowers within this credit market being selected for a loan.
The macro-economy has performed broadly in line with expectations from May 2023. In recent months, strong wage growth and a falling rate of inflation has boosted real incomes offering a slight macro tailwind for repayments.
2022-2023 Updated Returns ( as at May 2025)
Returns in 2022-23 are substantially ahead of expectations with a Gross IRR of 39.8%. This reflects a strong collections performance for loans on payment plans after the first 12 months
Our response to the Cost of Living was immediate and thorough, the macroeconomic landscape for the year was not as poor as originally expected, so our constrained lending resulted in above forecast returns.
2021-2022 Updated Returns ( as at May 2025)
Returns in 2021-22 are ahead of expectations. Returns for 2021-22 did underperform initially, with the cohort only just reaching lender breakeven in at the first reporting date in May 2022 (Net IRR of 0.3%-0.4%). The year was one of two halves with performance markedly weaker in the first half as the U.K. exited Covid-19 restrictions in the Spring and Summer of 2021, with the well-documented effects of the ‘pingdemic’ and end of furlough, producing weak credit performance. By contrast the performance over the Autumn of 2021 was stronger as the economy returned to a more ‘normal’ state.
We said in our initial assessment in May 2022 that we expected strong collections from the 2021-22 year and this has now been borne out. With a Gross Return (after losses and fees) now at 27.0%, this follows the Default Rate falling from 7.8% to 5.2% and the Delinquency Rate dropped from 11.7% to 10.9%.
2020-2021 Updated Returns (As at May 2025)
Returns in 2020-21 have continued to outperform expectations, with both the Default and Delinquency rates now below the forecast level. Collections are now minimal on this cohort as most loans have either completed or defaulted and so further improvements in performance are likely to be muted.
It should be noted that the figures above refer to the past and that past performance is not a reliable indicator of future results
2025-2026 Forecast Returns
For our financial year 2025-26 (loans maturing between 1st February 2025 – 31st January 2026) we are forecasting a Gross Return (after losses and fees) of 16.9% p.a..
Background
The key assumptions for the 2025-2026 Forecast Returns (when compared to actual returns for 2024-25) are:
A higher default rate of 6.9%.
A higher delinquency rate of 15.4%.
These Forecast Returns reflect an expected deterioration on the actual returns realised in 2024-25 (as at May 2025). The high levels of returns in 2024-25 were the result of a number of factors including: real income growth as the rate of inflation declined, improved credit decisioning as we continued to invest in understanding our customers, improved collections processes as we grew our team, better payment processes including using Open Banking payments (‘pay by bank’), the successful launch of our new longer duration ‘Mid Prime’ lending products, and at times continued constrained lending liquidity as we continued to scale our lending volumes.
We expect the macroeconomic situation faced by our borrowers will be more challenging over the year compared to the previous year as the rate of inflation stays stubbornly above target and unemployment edges higher due to higher employers National Insurance. Falling interest rates might continue to lead to less financial pressure on some over-indebted households than we have seen over the last few years.
Unemployment is expected to rise modestly over the course of the year, with the OBR forecasting a peak of 4.5% in 2025, consistent with their earlier projections. This presents a mild headwind to the working population we serve.
As with previous years, we anticipate continued economic stagnation and limited growth. The OBR now forecasts real GDP growth of 1.0% for 2025, revised down from their October forecast of 2.0%, with growth expected to average around 1.75% annually over the remainder of the decade.
Inflationary pressures have re-emerged, with CPI expected to peak at 3.7% in mid-2025 before falling back to the Bank of England’s 2.0% target thereafter. This temporary rebound is driven by higher energy prices, food costs, and persistent wage growth.
Uncertainty around the strength of UK consumers, the potential for renewed global trade tensions, and weak productivity growth continue to weigh on the outlook. As a result, we maintain a cautious stance and expect that returns in 2025–26 will likely remain below historical levels, in line with the muted macroeconomic environment.
Any deviation from our macro-economic assumptions, including for example entering a deep recession, higher than expected interest rate rises, higher than expected inflation, further changes to the regulatory environment or political instability, could undermine the situation and result in higher levels of default and delinquency.
Methodology for 2025-26
The Forecast Annualised lifetime return is the total return calculated on an Internal Rate of Return (IRR) basis that an investor can expect to receive on loans matured in the year from February 2025 to January 2026 (our company’s financial year) over the life of the loans. We will continue to update the actual returns (including recoveries) for our cohorts.
The Forecast return is an IRR calculated on the basis of historic performance of our loan book adjusted for forward-looking expectations. We are constantly improving our credit decisioning as we accumulate data but given the macroeconomic uncertainties, we have included a buffer on our historical loss rate.
The Forecast Return assumes an investor invests in a diversified portfolio of our loans each month throughout the Forecast Return period, and in proportion to the volume of loans reaching maturity each month by the Company.
For the purposes of this Outcomes Statement the Forecast Annualised lifetime return is based on expected cashflows from three different loan outcome-cohorts:
Performing Loans, being those that are fully repaid within the reporting period.
Defaulted loans, being those with no received payments.
Delinquent loans, being those that at the end of the reporting period have only made partial payments or have entered into an alternative payment plan.
Reasons why the actual return may differ from the Forecast Return:
The default and/or delinquency rate being different to expected.
The UK macroeconomic situation in the period being different to expected.
The Company’s loan volumes each month being different from forecast.
Changes to the regulatory environment in which the Company operates.
An investor’s portfolio mix being different to the Company’s volume mix.
The number of lenders on the platform impacting the uninvested weighting.
Delays in payments being distributed to lenders due to technical or personnel issues.
Our net return assumes a 25-35% cash drag and a 40% (higher band) tax rate – this may not match the experience or circumstances of all lenders.
Changes to The Money Platform’s economic model, for example a change to the income allocations between lenders and the platform (which would be communicated in advance to loan participation).
Reduction in interest payable due to changes in customer behaviour resulting in more early repayments.
What is an “Internal Rate of Return”?
The internal rate of return on an investment is the annualised effective compounded return rate or rate of return that sets the net present value of all cash flows (both positive and negative) from the investment equal to zero.
