Session timeout

Sorry, your session timed out after a long time of inactivity. Please click OK and Sign In again.


Peer-to-Peer faces up to Brexit

Stuart Law, Founder & CEO of Assetz Capital, will be speaking at the upcoming Marketplace Lending and Peer-to-Peer Securitisation Summit


Written by Stuart Law, July 2016

The Brexit referendum result has shaken the very foundations of the UK’s financial service industry, and as a result both traditional and alternative finance institutions are currently undergoing real-time stress tests. 

Investing, lending, saving and spending will of course continue in some form.  The first step is for everyone to avoid overreaction to the slew of forecasts, predictions and prophecies emerging after the Brexit vote, because history shows that even major market movements will register as mere 'blips' years from now. Nonetheless, there are still potential risks of the change in direction and very significant changes underway.

Post referendum political and market uncertainties are not only testing banks, but also the peer-to-peer (P2P) lending market. However I firmly believe that the P2P industry has matured and developed enough to not just survive, but to thrive during these uncertain times and that the leading players in this market should be stable and secure enough to be able to capitalise on the many opportunities that the lead up to Brexit presents.

A contributing factor to the stability of P2P investing is the fact that it is less geared to external factors that drive other financial institutions.  This means that regardless of the undulating confidence that we will continue to experience during the Brexit transition period, P2P will not be affected in the same ways as other institutions and in some cases may act in the opposite direction.  Using the same stress testing methodology as used by UK banks, our own business has demonstrated that it should also be able to weather the worst-case Bank of England recession forecasts, whilst at the same time avoiding the drastic lowering of rates that would otherwise hit investors’ returns.

Stability is partly achieved because of the comparatively low overheads P2P lending businesses operate on.  As such the P2P model has been shown to be able to offer a higher loan interest rate to an investor than a bank savings account can, albeit at a different level of risk, whilst still providing loans to borrowers at a time when banks want to slow their lending, and hence also perhaps allowing higher borrower rates. Recessions can effectively increase P2P margins, which may benefit investors by providing higher rates whilst also being able to cover any increase in expected losses.  P2P loan interest rates are often fixed rates, and this is proving attractive, especially as the banks continue to offer reducing savings rates.

As a result, Brexit will create big opportunities for P2P platforms as bank interest rates on business loans are likely to rise - making banks less competitive - and their lending volumes are reduced and at the same time banks are likely to lower their savings account rates even further as Base rate falls, as expected. This will allow P2P lenders such as Assetz Capital to continue to grow strongly and deliver more capital to businesses that can provide lenders with solid loan security and also deliver more interest to lenders.

As a business that has already lent more than £120m to British businesses, we also expect to see the continuation of attractive loan interest rates paid by Assetz Capital and a widening of the gap with bank savings account interest rates.  P2P-lending returns typically range from 3.5% to 7.5% a year, before tax and any loan losses not covered by loss-provision funds. 

In conclusion, P2P should be seen as a strong potential “BrexitProof” option for both investors and borrowers.  Established platforms with good credit underwriting should be able to withstand changeable conditions, market uncertainty, lack of confidence and a whole host of other external factors which tend to cause havoc across the traditional banking model.

About the author

Stuart Law is the Chief Executive and founder of Assetz PLC, a group of property and financial services companies that includes Assetz Capital, one of the UK’s leading Peer to Peer lenders.
Stuart set up the first of the Assetz group of companies in 1999 in response to the demanding needs of investors for more information about the management of money, property and retirement.  He launched Assetz Capital, the Peer to Peer offering in 2013, which has gone from strength to strength and has lent more than £120 million to UK businesses to date.
His investment experience and his opinions on the P2P market are sought after by newspapers and journals, and he has written and contributed regularly to articles in publications such as the Financial Times, the Daily Telegraph, Money Marketing, Property Week and the Independent.
Stuart takes a hands-on approach to business, and as such is very involved with the day to day running of the company.  As an active investor, Stuart has a UK and international portfolio which includes UK buy-to-let, student property, holiday home lettings in Europe and UK commercial property and development.
He is also dedicated to providing education and skills to private investors who wish to profit from the mathematics of investment, as he has in turn helped people consciously plan effective savings and investment strategies centred on investing, not speculating.
In 2012 Stuart was named one of the most influential figures in property in the UK by The Telegraph.

Stuart will be speaking at our upcoming Marketplace Lending and Peer-to-Peer Securitisation Summit in London, please click here for more details

This content is provided by Euromoney Seminars for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.