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Alternative Finance blog


Brexit and Interest rates: what do they mean for crowdfunders and P2P INVESTORS?

Brexit and Interest rates: what do they mean for crowdfunders and P2P INVESTORS?

3 months ago


London, 16 February 2018: well it has been a busy week hasn’t it. Brexit dominated the headlines, as the Conservative Government did its best to look organised, rouse and inspire. Economically the Government is looking to reassure businesses that the exit from the EU is good news, not bad, and change will have a minimal and (eventually) positive impact. Big businesses is making up its own mind, but at the start-up and small, growing business stage any period where established businesses are pausing and the status quo is changing makes for opportunity. Which means there are plucky young UK businesses seeking capital (your money) in exchange for equity (shares – a stake in their business) that are small today but looking to be big tomorrow. The risk is that many won’t make it. The opportunity is that those that do will offer those who took a risk on them attractive multiples on their initial investment.  Why not take a look at the businesses pitching for investors in the UK today?

However, it wasn’t all Brexit, there were a few significant financial nuggets in the news too this week. The most significant of which for any lender or saver was the holding of interest rates by the Bank of England’s Monetary Commission. Or rather, the comment that came with the news of no change which was that committee expected to raise rates sooner than it had previously signalled kicking off in May of this year.

What does this mean? Well for savers as welcome as a rise may be the rates will still be low. Which means the search for yield, as they look for an income from their money, is likely to continue. Peer-to-peer (P2P) investors are also seeking yield and, relative to many popular equity income funds, which also come with no capital guarantee, P2P looks attractive with estimated annual yields of 4% up to 12%, across different platforms and time periods. 

For borrowers a rate rise is clearly bad news, no-one wants their lending to cost them more. It may be that in the consumer P2P space a rate rise has an impact on default rates.  It is certainly a concern that borrowing costs could become unmanageable for many people in the UK even with slight rate rises and this concern is filling column inches.  In the business lending space it is less likely to have an immediate impact. Why? Well loans are more likely to be secured and a rate rise tends to hit customers before it hits businesses, where controlling costs and increasing sales or rather the value of sales and therefore profits is key.

What should P2P investors be doing? Well it won’t hurt to keep an eye on default rates. Of course, if the P2P sector can agree on a singular way of defining and calculating default rates, making it easier for investors to compare across platforms that would be a big step forward. Businessagent.com is continuing to lobby platforms to do this because it would make informed investor decision making much simpler. If you would like to see this too let your P2P platform know.

If you are interested in viewing estimated annual interest rates from the UKs P2P business lending platforms you can see them all on businessagent.com. We also offer a handy new comparison tool that allows you to more closely compare the offers of two platforms. Just click on a P2P platform rate that interests you and then choose a platform you would like to compare it with on the right hand side. We think it comes in helpful when you are trying to make a decision.  We hope you like it.

Tagged: Brexit P2P Investors




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