On the back of the Bank of England interest rate announcement, Assetz Capital one of the UK’s largest peer-to-peer lenders, is predicting that both savers and borrowers will continue to turn to alternative finance companies in increasing numbers.
Unlike traditional banks, which will be hit hard by the interest rate reductions, P2P lending platforms such as Assetz Capital, remain largely untouched by the fluctuating financial markets and continue to offer the same rates to investors and businesses as they did prior to the referendum vote and today’s base rate decision. P2P investing is less geared to external factors and the undulating confidence that Britain is expected to experience during the Brexit transition period.
For investors, P2P lending offers savers the opportunity to invest and gain a respectable return on their capital, meaning they no longer need to turn to measly savings accounts offered by the banks. Since launching in 2013, around GBP130 million has flown through Assetz Capital to credit-worthy borrowers, earning investors a total gross interest of more than GBP12 million to date and this lending is predicted to continue to rise rapidly.
Stuart Law, CEO and co-founder of Assetz Capital, says: “It’s unsurprising that interest rates have fallen today as the BoE seeks to minimise the economic effects of a Brexit. Once again savers are set to suffer as traditional savings accounts become an even less attractive option. We are expecting savvy savers to continue to turn to the alternative finance market, which has matured and grown out of the effects of the last financial downturn, and get decent returns on their capital. Alongside the potential financial benefits, investors in platforms such as Assetz Capital can have a hugely positive impact on a local community and can choose which British SMEs they wish to support.”
Alongside the expected rise of lenders flocking to the alternative finance market to deploy some of their savings for a better investment return, Assetz Capital also predicts that the number of business borrowers will also rise sharply as a result of the cut interest rate. As banks are expected to become more reluctant to lend in the current financial climate an ever-increasing number of businesses are turning to P2P lending to provide flexible, fixed rate loans, providing they pass the strict checks carried out by lending platforms.
Law says: “For businesses in need of funding, P2P lending is becoming an increasingly attractive proposition. Fixed rate loans offered by platforms such as Assetz Capital provide businesses with a stable way to predict part of their finances, regardless of external market conditions. Generally speaking, loans are much safer for a business than overdrafts because banks can’t withdraw them on short notice and the large scale reduction in overdraft facilities is likely to continue even faster now driving more businesses to consider business loans to provide them more stability at a lower cost. Overall, the base rate cuts will further push savers towards alternative finance options. Both the critics and the backers of peer to peer are about to have their respective theories tested and matters currently appear to bode well for the latter being proven right. P2P Lending is definitely investment not savings and carries more risks but the returns are hundreds of percent more than a typical savings account and with a platform like Assetz Capital, security is taken on every loan to help protect the capital too.