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The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

Peer-to-Peer Lending – The Clampdown Has Begun

Peter Hemple reports

Peer-to-Peer lending enables investors to lend funds directly to borrowers via an online platform. Whilst platforms facilitate the lending, undertake credit assessments and other risk management, they do not act as a counter-party to the loan, and contracts are direct between the investor and the borrower.

For borrowers, P2P brings additional choice and competition into the lending market. For investors, P2P lending provides a new investment choice.

The industry is still growing
According to the Peer-to-Peer Finance Association (P2PFA), the level of P2PFA platform lending continued to increase during the first quarter of 2019 – with more than £850m of loans facilitated over the quarter – taking the cumulative lending for the Association’s members to more than £10.5bn.

Commenting on this quarter’s statistics, Robert Pettigrew, director of the P2PFA, said: “During the first three months of 2019, there has been an increase in levels of new lending, as well as in the number of lenders and borrowers across the P2PFA: more than a quarter of a million consumers, nearly fifty thousand businesses and more than eight hundred real estate and development projects have loans financed by more than 150 thousand lenders on member platforms. Each of these, taken in the context of a trajectory of growth, underscores the valuable contribution which peer-to-peer lending platforms continue to make to the UK economy.”

The amount of loans facilitated in Q1 2019 was around 5% higher than in Q4 2018, when there were £809m agreed in loans. Pettigrew said there is clear evidence the market is maturing and discerning consumers are increasingly aware of the variety of choice available.

“It is clear that customers are progressively savvy when selecting their loan provider – through increased use of online channels and price comparison sites”, he added.

P2P investors hit by falling returns as high-risk loans falter
However, a new report highlights slower growth and lower returns recently for the UK’s peer-to-peer lenders. Net returns from marketplace lending stood at 4.1% at the end of 2018, down from a high of 6.4% in 2016, the fund administration company Link Asset Services said in a report in March this year.

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