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Peer to peer. The future

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The peer to peer lending market has blossomed over the past few years and even for very active brokers such as myself, it is a challenge to keep up with developments. Just last week a prominent player was absorbed into another lender. A development which has generated some comment from myself

The key to the on goimg success of peer to peer lenders is a combination of rates and ease of delivery. The latter is a factor which has been heavily underestimated by the established lenders who can still aact as if the are “doing a favour” to even the best placed borrower

The rates have to make sense. “Make sense” is probably a better definition than “be competitive”. The inevtiable extra cost has to be weighed against the resources the borrower is happy to spend to keep rates to the minimum.

To give an example of where a new entrant may have misjudged the market, a peer to peer bridging loan platform is offering investors a return of 12% pa. That is almost exactly the rate of the standard existing Bridge so wheres the margin? Clearly they will have to be charging a fair bit more than 12% but will they be able to offer the superior ease to compensate? In this market, I have my doubts

Too often established lenders have often fought back by attempting to rubbish the new entrants with their mouthpiece Lord Turner being particularly hysterical. They should be fighting back with products of their own rather than spreading nonsense. Think about your clients rather than the competition perhaps?

We must not forget that compeition and innovation is enormously beneficial. The lending market is unrecognisable from even just five years back and with the greater choice the role of the broker has never been more vital

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