When peer to peer (P2P) first appeared in the UK in 2005, people were sceptical that such a scheme would ever work. A decade later it’s a very different story, with Zopa, the first P2P player in Britain, having now lent in excess of £1bn; and this week RateSetter celebrated its fifth anniversary by breaking the £800,000m barrier.
There are still many P2P doubters, most of whom are concerned about the safety of their cash in the absence of the Financial Services Compensation Scheme (FSCS) safety net. While it’s natural for people to want to protect their savings, just because there’s no FSCS protection doesn’t mean that the P2P providers don’t take the matter of safety of funds seriously.
RateSetter operates a provision fund to cushion its lenders (savers). Each person who takes a loan is charged a fee which is paid into the provision fund to cover any late payments or defaults. At present there is more than £16m sitting in the provision fund and RateSetter is rightly proud that of the 26,000 lenders on its platform, nobody has lost a single penny since the day it launched in October 2010.
Peer-to-peer lending isn’t going to appeal to everybody, but the big players (Funding Circle, Zopa and RateSetter) are each lending upwards of £40m every month.
Whether you’ve got money to lend or want to borrow, when you see the competitive rates on offer it’s not surprising that more people are dipping their toe in the P2P water. At the time of writing RateSetter is offering lenders 3.1 per cent on its monthly account or 4.1 per cent fixed for one year – double what you’ll get on the best bank or building society savings accounts. If you’re looking at putting money aside for a longer term, then Lending Works is currently paying 4.8 per cent for three years or 6.1 per cent for five years.
As with all forms of lending, your capital is at risk. Of course some borrowers won’t repay on time or may default, but the comprehensive measures that these big P2P providers have put in place in an effort to protect people’s cash gives their many customers the reassurance they seek.
Household bills up 18 per cent since 2007
We’re all used to hearing about the changes in the cost of living as per the consumer prices index (CPI), the Government’s preferred measure of inflation. But this week a new report revealed just how much our household bills have soared in the past eight years.
Bacs, the organisation behind the direct debit system in the UK, has just published the results of its first “Bill Tracker”, which looks at changes in the level of payments made straight from our bank accounts. It doesn’t account for clothing, or food and grocery shopping, but it’s an insight into how much extra we’re paying to keep our households running.
A “basket” of the most common household bills paid by direct debit – energy, water, mortgages and rent, council tax, broadband and phone, TV licensing and household insurance – has been tracked, with data stretching back to 2007. This shows the average amount has gone up from £565 in June 2007 to £668 in June 2015.
No wonder so many fear that a rise in mortgage rates may tip them over the edge.
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