P2P Covid loan borrowers protected from interest rate hikes

Borrowers who have accessed Covid emergency loans during the pandemic through peer-to-peer lenders may be protected from interest rate rises.

The Bank of England’s monetary policy committee is rumoured to be planning an interest rate rise to help stem rising inflation.

This would hit borrowers on any loan with a variable or tracker product that follows the Bank of England’s base rate.

British Business Bank data shows that 17 per cent of accredited lenders under the coronavirus business interruption loan scheme (CBILS) offered variable rates.

Another 32 per cent offered a mix and 51 per cent offered only fixed rate deals.

The British Business Bank said there was no equivalent data for the successor recovery loan scheme (RLS), which does not have an interest-free period.

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CBILS launched in April 2020, providing small- and medium-sized businesses with loans of up to £5m.

The government guaranteed 80 per cent of the finance to the lender and paid interest and any fees for the first 12 months.

Accredited lenders were approved by the British Business Bank and set their own rates up to a maximum of 14.99 per cent.

But many borrowers may now be coming to the end of the first interest-free year and anyone on a variable CBILS product, or one from its RLS successor, could suddenly see their repayments rise if interest rates are hiked.

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However, Peer2Peer Finance News analysis has shown that a number of accredited P2P lenders offered government-backed loans with fixed rates.

Funding Circle, the first P2P firm accredited to CBILS and one of the largest lenders under the scheme, had fixed rates ranging from 1.8 per cent to 7.4 per cent.

Its RLS rates range from 8.6 per cent and 12.1 per cent and are fixed.

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Assetz Capital also offered fixed rates on its CBILS and RLS loans.

It did not reveal its CBILS rates but its RLS rates start at 6.99 per cent per annum for development finance loans and 5.99 per cent for commercial mortgages.

LendingCrowd offered fixed-rate CBILS loans starting at 5.6 per cent.