On the 15th June we will be launching Zopa Core, to run alongside Zopa Plus, (both of which will be available in the ISA wrapper from the same date).
Zopa Core will offer customers loans from our A*- C markets, and like Plus, the loans will not be covered by the Safeguard Fund.
Existing customers can continue to buy Access and Classic loans, that will be covered by Safeguard, until December of 2017, after which we will retire Access and Classic.
Safeguard coverage of loans
Retiring Access and Classic means that from December there will be no new loans covered by Safeguard.
Any existing Safeguard loans, or new Safeguarded loans purchased before then will continue to be covered by the fund, until those loans have matured. As a result we expect the fund to continue until 2022.
Contributions into the fund
We make contributions to Safeguard from a combination of borrower up-front fees and their monthly repayments.
As a result we publish two coverage ratios of the fund:
The current coverage ratio is the amount in the fund today divided by the expected future pay-outs of existing loans. This excludes any income due to the fund from future repayments
The coverage including future income is the amount in the fund today, plus the expected future contributions from repayments of existing loans, all divided by the expected future pay-outs of existing loans
Existing Safeguarded loans will continue to make their contributions (from repayments) into Safeguard after we have retired Access and Classic.
Impact on coverage ratio of the fund
The impact of contributing less upfront and more through repayments means we expect the current coverage ratio to reduce in the short term, however, the coverage including future income should remain stable.
As new Safeguard lending stops after Access and Classic are retired in December, we expect the current coverage ratio to increase as there will be no new loans being covered by the fund, but the ongoing monthly contributions from existing loans will continue to be made.
Andrew Lawson is Chief Product Officer at Zopa