March 2018 Update From Stuart Law, CEO
The growing interest in Peer-to-Peer lending isn't just down to the tax-free interest under the new ISA though. When the Bank of England raised rates a little late last year there was extensive criticism of this not being fully passed on to savers by banks. With inflation still around 3% and most bank interest rates failing to keep up, many people are voting with their feet and moving from savings to investment in order to seek a higher return, albeit with investment risk. That means many people looking to invest in Peer-to-Peer lending and now the new Innovative Finance ISA tax-free wrapper around it.
We're also seeing somewhat of a setback in global stock markets with a Trump-led trade war being the current big concern and people seem to be watching for signs of the long bull run in stocks coming to an end. Perhaps it will and perhaps it won't just yet but it doesn’t seem to be the one way bet that it has been for a while.
Peer-to-Peer lending isn't any different in terms of having its own issues to manage and warnings on consumer debt levels, for example, continue to emanate from the Bank of England and the FCA. In our own chosen sector of secured business lending we take a cautious approach and our own loan book of well over £200m has security taken from borrowers that represents around 160% of the money that we have lent. With the vast majority of security that we take being property, we have had, and will continue to have, a considered attitude to risk of capital loss for our investors. We have now delivered over nearly £37m of earned interest to our investors and over 25,000 of you have now signed up.
We've had a few changes on the platform recently such as the much-improved automatic diversification of your investments in the investment accounts (Great British Business Account Series 1 and 2, Green Energy Account and the Property Secured Account) and the inclusion of the Manual Lending Account into the ISA wrapper. The Great British Business Account Series 2 has been a great success within the ISA with its target gross interest rate of 6.25%.
Lending isn't without risk, even secured lending, and occasionally a defaulted loan may have a shortfall even after we have finished recoveries on that loan. All of our investment accounts other than the Manual Lending Account have a provision fund that seeks to cover late interest as well as any capital shortfalls following the recovery of any defaulted loan security. Our recoveries team does a sterling job and we do get comments occasionally that it can take a while to complete a recovery but I think the overriding point would be that we put in a huge amount of effort to carry out a great recovery on behalf of investors and sometimes that takes some time to achieve. We know you put a lot of trust in us in being able to do this job well and with over 250 man and woman years of credit experience in our credit team alone, we believe that is trust well placed. In the business as a whole we have approaching 100 people once our current vacancies through expansion are filled.
Thank you for your continued support and we look forward to many more years ahead of delivering attractive rates of interest on your capital that you invest with us.
- March 6, 2018