Update on Choice and refinancing deal

1. What has happened?

On 18th March 2020, we paused all transactions on Octopus Choice. This decision was taken because of the extreme market conditions, with a high volume of investors trying to liquidate their investments. 

In recognition of the lack of liquidity for investors, Octopus immediately waived its platform fee so returns on loans from that date increased from c. 4% to over 5%. We have now decided that our platform fee will be waived indefinitely. 

Since last March, over £100 million from 119 loans has already been returned. No capital or interest has been lost on any of these loans. In parallel, we’ve been looking at further options to return more capital to investors. While liquidity is clearly important, we’re confident in the quality of the loans we have written and have not considered any options that would have resulted in any loss of capital or interest for Choice investors. 

In reaching these agreements, we are also permanently stopping trading within Octopus Choice. This means we will not be re-opening the product for investment.

2. Why have we made this decision?

Since we paused trading in the Choice platform, it became clear that re-opening trading would not provide the liquidity that investors expect from the product. Hence, we are providing an alternative means of liquidity via this refinancing deal. 

In addition to this, the peer-to-peer market more widely has seen reduced demand from retail investors following the introduction of new rules by the FCA in 2019.

3. Why have you been unable to resume transactions on the platform?

Peer-to-peer platforms are loan marketplaces and rely on a balance of buyers and sellers. The buyers are those investing new money, while the sellers are those making withdrawals. 

In March, that balance had shifted so that demand for withdrawals significantly outstripped new investments, which is why we had to pause transactions. 

While we had hoped the balance would return so that we could facilitate trading on the platform once again, we have seen that demand for withdrawals significantly outweigh demand for new investments for some time, which we don’t expect to change soon. 

Under these conditions, our ability to provide liquidity is extremely limited, which is why we have taken the decision to refinance part of the loan book in partnership with an institutional investor and start returning capital to our investors. 

4. What about the remaining loans and invested monies?

Money that is not being returned right now will remain invested in the same loans and interest paid by borrowers will still be paid to investors. We will continue to provide regular updates on investment performance and will continue to work on further steps to provide more liquidity to investors. It’s important to remember that all Choice loans carry a first charge against the property and our own balance sheet money is in first loss position (up to 5%) across every loan.

Refinancing

5. Why has it taken you so long to agree this course of action?

Since we made the difficult decision earlier this year to pause all transactions on the platform, we have been doing everything we can to try and deliver the expected levels of liquidity for our investors. While we had hoped to do this via trading on the platform, we no longer think this is an option given the current unprecedented market conditions. Therefore, we have negotiated an agreement to refinance loans, during a difficult and unpredictable time in the UK property market and the country more broadly. We have a dedicated team working on this and there are a number of stages to the refinancing, which will take time. Our focus throughout the process remains on trying to secure the best outcome for our investors.

6. When do you expect the next deal to happen?

We expect to refinance another portion of the loan book within the next few months. Beyond that, we are not in a position to provide guidance  at this point, but we will make further announcements as soon as terms are agreed.

7. What about money that has not been invested in loans?

Any money not invested in loans is in cash and can be withdrawn at any time or set for automatic monthly payments to a nominated bank account.

Operational details

8. When will I receive my next tax statement?

Choice tax statements will be uploaded to the online adviser & client portal within 2 weeks of Tax Year End.

9. How do I change my bank details?

You can do this by logging into your Octopus Choice account and following the steps below:

  • Hover the mouse over your name at the top of the screen. This will drop down two options, ‘view account’ or ‘logout’.
  • Click on ‘view account’.
  • Add your bank details by clicking on the small pencil icon to update your information in the bank details section.

10. How do I initiate an ISA transfer?

To initiate an ISA transfer, please contact your chosen ISA provider and follow the steps outlined by them. Please note that the instructions need to come from your chosen ISA provider.

11. I haven’t received my money yet, when will it arrive?

The payment has been approved and you will receive it into your nominated bank account with 3/5 working days.

12. How do I request a full withdrawal?

To set a full withdrawal please login to your Choice account, select either your General or ISA account if you have one, and change your interest instruction to “withdraw”. Your available cash will then be withdrawn every month on the 15th of the month.

13. How will my remaining loans be managed?

The remaining loans will be managed by The Octopus Real Estate Team.

14. Can I transfer my money to another Octopus product?

Yes you can, please email [email protected] for further information on the product you would like to transfer your money to.

15. How long will my ISA transfer out take?

The timeframe from sending your instruction and your new provider receiving your funds can vary from one ISA provider to another due to their internal processes. However, once we receive your instruction, we aim to send the funds within 7-10 working days.

16. Why have you set ISA instruction to not withdraw?

As investors will now have more uninvested cash on their account, all ISAs have been set to not withdraw.  Since investors may wish to initiate an ISA transfer, rather than withdraw that money to their bank account, we thought it right we ensure our investors had this choice. By doing an ISA transfer, the money will remain within the ISA wrapper. Should you wish to withdraw the money from your ISA to your bank account, please do so by logging into your Octopus Choice account and clicking ‘Withdraw’ at the top of the page.

17. Does this impact ongoing ISA transfers that have already been initiated?

There will be no effect on ongoing ISA transfers and these instructions will be carried out as initially requested.

18. How can I change my instructions?

Log onto your Octopus Choice account and click on “My interest & cash” on the left-hand pane. Here you can toggle ON or OFF with your instruction to “Keep all cash from interest and repaid loans in my Choice account”. Please note that we will need your bank details to pay out all money on your account to you (see above as to how you can add bank details to your account).