The ‘real returns’ on offer from P2P lenders and how they beat other assets
The rising cost of living is pushing down the real returns of peer-to-peer loans but the asset class still beats cash and other investments.
Research by Peer2Peer Finance News has analysed the impact on P2P loan returns of the inflation rate hitting 5.4 per cent by assessing the ‘real return’ an investor would get after you take account of the consumer price index figure.
In some cases, peer-to-peer investors may still earn inflation beating returns in real terms.
Read more: Base rate rise will see banks “clobber” borrowers
For example, EstateGuru and CapitalStackers offer returns of 11.25 per cent and 12.15 per cent after bad debts respectively, according to P2P analyst 4th Way.
The real return after inflation for EstateGuru investors would be 5.85 per cent, while CapitalStackers’ users would get 6.75 per cent.
LandlordInvest customers can match inflation, with its interest after bad debts of 10.84 per cent being pushed down to 5.44 per cent.
SoMo offers users 9.12 per cent after bad debts, according to 4th Way, which is 3.72 per cent after inflation.
Read more: Four reasons to consider P2P lending for your portfolio
Similarly, Blend Network’s return of 8.91 per cent after bad debts is pushed down to 3.51 per cent, while the 7.63 per cent offered by CrowdProperty would be 2.23 per cent.
Other platforms such as Assetz Capital, which offers interest of 6.02 per cent, would give investors returns of 0.62 per cent after inflation.
The lower returns demonstrate the importance of diversification as you can spread your loans across different platforms to boost interest and minimise losses.
The interest offered by P2P loans still manages to beat the real returns on offer by other asset classes.
Read more: Which P2P platforms can beat inflation?
DIY investing platform Interactive Investor launched its own real returns index this week to track the interest on offer from savings, the stock market, gold and property after inflation.
It found that while equities such as the FTSE All Share Index still offer inflation-beating real returns of 12.92 per cent, the real return on easy access cash accounts has plummeted to -5.23 per cent and the gold yield is at -8.27 per cent.
Residential property is at 0.42 per cent.
It is worth remembering that the rate of inflation can of course drop and may well do so if interest rates rise further.
At this point, the margin between P2P interest and inflation may be close enough that lenders will quickly be offering decent enough yields to be able to beat inflation again in real terms.
