P2P will play larger role as liquidity tightens
Peer-to-peer lenders are forecast to play a more significant role in the financial services sector as banks tighten their liquidity.
Ongoing economic volatility has already caused banks to pull back on lending, which has created an opportunity for alternative lenders to step in. With further base rate rises predicted this year, economist and business adviser Vicky Pryce told Peer2Peer Finance News that she expects to see P2P playing a larger role in the lending ecosystem.
Read more: BBB: Challenger bank lending surpasses legacy banks
“More liquidity support from central banks has been made available, but the expectation is that lending conditions from banks may tighten ahead,” said Pryce.
“If that proves to be the case then P2P lending should have a bigger role to play even if interest rates start to fall at some point as is widely expected.”
Read more: Invest & Fund: Higher base rate alone will not boost lending pricing
Mike Carter, policy lead for lending platforms at Innovate Finance, echoed her views, stating that “the combination of the steady reversal of quantitative easing and potential changes to the bank deposit insurance and related bank liquidity rules is likely to reduce bank liquidity available for lending, and P2P lenders will be needed to help fill this increasing gap for small- and medium-sized enterprise and consumer borrowers, as they have done over the last 10 years.”
Read more: P2P lending retains its edge as base rate rises
Consensus estimates are that the base rate will rise by another quarter of a percentage point this month, to 4.5 per cent, while analysts believe that the base rate will rise to five per cent by the autumn of 2023.
