Record-breaking first half for Lending Works!
As we reach the halfway point of a frenetic 2015 we’ve found a bit of time to reflect on our progress, and indulged in the occasional smile between us as a result! It’s almost 18 months ago to the day that Lending Works officially launched, and just under £5 million in loans over the first year provided an excellent launchpad.
However, we were confident that the first half of 2015 would see us kick on from there, especially in light of the pension freedoms which came into effect on 6 April. Liberating the retirement pots of those aged 55 or older was always likely to expose peer-to-peer lending to a new realm of investment capital, and in early April we thus launched a four-pronged strategy to attract these later-life lenders – including a special cash bonus, dedicated and named customer advisors, our Retirement Income Calculator and the Auto Income tool. The results that followed exceeded even our expectations!
Cracking the pensions market
The total amount lent to borrowers doubled to over £10 million in the first half of this year, and it was the significant increase in lender funds from over 55s which played a major role. Prior to 6 April, around 35% of lending capital came from this age group. However, more than 70% of new funds since this date have come from these ‘silver lenders’.
That’s not to say that younger lenders have been crowded out. In fact, total lending capital from those aged 18-55 has increased steadily month on month. But it is the upward trend of lending capital from retirees (or those nearing retirement) that backs up what many had suspected: the pension reforms are a significant boost for peer-to-peer lending.
A flexible alternative to annuities
Aside from declining returns, the inflexibility of annuities made them increasingly unappealing. This is partly what inspired the development of our Auto Income tool, which allows lenders to take their repayments from borrowers (be that interest and capital, or interest only) as an income direct to their bank account.
Since its launch in the second week of April, 76% of new lenders over the age of 55 are making use of this income device, while more than a quarter of pre-existing lenders in this age bracket have adopted it. Such statistics underline the attractiveness of a more-flexible investment that allows lenders to enjoy great returns without having to wholly lock their capital away, and is an important reason for P2P’s emergence as an alternative to an annuity.
As it stands, more than 53% of our lenders are of a pensionable age, with the oldest being a remarkable 90-years old. That said, we continue to be encouraged by the growth in the number of younger lenders joining the platform too, and are currently developing further initiatives for these markets.
Furthermore, we have seen strong and sustained growth in the number of creditworthy borrowers coming to our platform. Intriguingly, less than a quarter cite debt consolidation as the reason for taking a loan with us. Instead, capital from our lenders is funding new cars, dream family holidays, value-adding home improvements, weddings and once-in-a-lifetime gifts for loved ones.
On the up and up!
It all leaves us in a position of strength going into the second half of 2015, and puts us well on course to achieve our target of facilitating £25 million in loans by the end of the year.
Reflecting on Lending Works’ continued success, our co-founder and CEO Nick had this to say:
“We are now lending up to £150,000 a day to borrowers – a figure that exceeds all expectations for this stage in our development, and one that only looks set to grow. This tells us that our customers like what we’re doing; but more than that, it proves how peer-to-peer lending is moving into the mainstream more than ever. The ‘alternative’ in ‘alternative finance’ is starting to look redundant.
“The sheer diversity of both our lender and borrower groups never fails to astonish me. Our lenders span an incredible 73-year age bracket, and our borrowers aren’t just taking loans to consolidate their debts, but to make life-changing purchases or pay for those once-in-a-lifetime opportunities.
“As we grow we will continue to invest in our team – the engine behind everything that Lending Works is – and I look forward to welcoming new colleagues, advisors, directors and investors over the coming months.”
There is barely a week to go until the conclusion of the 2017/18 financial year, which means that, as ISA season begins to hot up, time is running out to take advantage of your ISA allowance.
At the Summer Budget in 2015, George Osborne had multiple nuggets of good news for investors in peer-to-peer lending (P2P), most notably the announcement of the new Innovative Finance ISA (IFISA).
Over the last decade, there can be little dispute that the reputation of mainstream banks – and particularly the so-called ‘Big Four’ (HSBC, Barclays, Lloyds and RBS) – is at its lowest ebb.
The peer-to-peer (P2P) lending industry is now regulated by the Financial Conduct Authority (FCA). The regulatory framework has been designed to protect customers and promote effective competition.
Loan underwriting is the process that we undertake to analyse all of the information provided by each loan applicant and their credit file to assess whether or not that applicant meets our minimum loan criteria. As part of that process all data is verified, analysed and summarised to paint a picture of each applicant.
When you earn interest from a regular bank savings account, for example, the bank automatically deducts basic rate tax (currently 20%) before paying your interest. With interest earned from peer-to-peer lending, tax is not deducted automatically so lenders will need to declare their income to HMRC.
As 2018 draws to a close, with our bellies full of Christmas turkey, it's only natural to look back on the past 12 months and reflect. No doubt, it's been a turbulent one economically and politically, and not everyone has had it all their own way.