Money Insider: Peer-to-peer lending shows some longevity
Saturday 14 April 2012
Many people doubted whether peer-to-peer lending would ever really take off, but it appears that the sector is going from strength to strength and increasingly being accepted as a credible alternative to the banks.
Compared with mainstream banking this new breed of finance is still in its infancy. Zopa, the UK's first peer-to-peer lender, celebrated its seventh birthday last month.
A lack of confidence in the UK banking sector since the credit crisis, combined with high borrowing rates and low savings returns, has helped the peer-to-peer market flourish, with new providers entering the industry in the past couple of years.
Zopa remains by far the biggest player and to date has arranged more than £185m in loans, including a monthly record of £8.2m in January alone.
A more recent arrival on the peer-to-peer scene, acting as the go-between for individual savers and borrowers, is Ratesetter, launched in October 2010. To date it has already provided more than £18m in loans.
Along with Zopa and Funding Circle, Ratesetter formed the Peer2Peer Finance Association, a UK trade body set up to ensure that the sector maintains high minimum standards of protection for consumers and small business customers.
The peer-to-peer market is not solely aimed at personal customers, and with banks tightening credit policy and reportedly more reluctant to lend to SMEs, we've seen the emergence of a new breed of business lenders including Funding Circle and Crowdcube.
Funding Circle has lent more than £25m to businesses since it launched in 2010, with the average loan at around £40,000. The company pools the savings of investors, who have enjoyed average returns in excess of 8 per cent, while the current bad debt ratio is just 0.3 per cent. Another newcomer, Crowdcube has already secured more than £2.5m of funding for new businesses just starting out.
Potential borrowers shouldn't see this alternative banking concept as a soft touch, as strict credit scoring criteria are absolutely vital to ensure defaults are kept to a minimum, to give people confidence to continue to deposit their savings with the peer-to-peer companies.
Ratesetter, for example, recently said it approved only 10-15 per cent of loan applications, so while it may offer a simpler and fairer way to borrow money, if you don't have an excellent credit profile you're going to have to seek your finance elsewhere.
One of the main concerns among people depositing their cash with peer-to-peer providers is that although the returns far outweigh those paid by the banks, they don't offer the cast-iron guarantee to savers that bank customers enjoy under the Financial Services Compensation Scheme.
Even though tough credit scoring criteria are in place, there is still an element of risk, albeit small, that you don't have with a bank or building society. As long as you understand and are comfortable with this, lower overheads of not having to run a nationwide network of branches means you can obtain better returns on your cash in the peer-to-peer market.
Providers have their own methods of trying to mitigate the risk to depositors. Zopa, for example, will spread your money among a wide range of borrowers, while Ratesetter has a "provision fund" built up from borrower fees and used to reimburse lenders in the case of late payment or default.
The more established this market becomes, the more confidence consumers will have, and if providers continue to keep rates competitive and bad debt levels low, the peer-to-peer industry could soon play a much bigger role in the UK personal finance market.
Isa best buys for the new tax year
There's been a flurry of activity in the ISA market over the last couple of weeks with rates being tweaked and products relaunched as we moved from one tax year to another. Now the dust has settled here are some the best deals around if you're still deciding on where to put your tax free savings.
If you are not worried about transferring existing ISA balances then take a look at Cheshire BS and AA savings, both paying a market leading instant access rate of 3.5 per cent.
Both accounts include introductory bonuses, so make a note to switch again next April.
If you've got existing ISA money to move, take a look at Santander at 3.3 per cent with instant access, Aldermore at 3.15 per cent with 60 days notice for withdrawals or a one year fixed rate from Santander paying 3.5 per cent.
There are higher rates available if you're prepared to lock your cash away for terms of between two and five years, but which ever account you opt for these best buy deals may well not be around this time next month, so grab them while you can.
Andrew Hagger – Moneynet.co.uk
- 4 #JeSuisEd: People share photos of themselves eating awkwardly in solidarity with Labour leader
- 5 Women think Irish men are the sexiest, survey finds
In defence of liberal democracy
General Election 2015: Post-election 'shambles' looms as 70 per cent of voters say SNP 'should not be able to veto UK government policies'
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
General election live: SNP suspends two members for disrupting Labour rally
General Election 2015: Sturgeon claims Scots 'appalled' by Ed Miliband's refusal to work with SNP
iJobs Money & Business
£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...
£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...
Day In a Page
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business