Assetz Exchange: 7pc yield is sweet spot for P2P loans  

Seven per cent is the sweet spot for peer-to-peer lending yields in the current high interest rate environment, says Peter Read, director and founder of Assetz Exchange.

Following a series of Bank of England base rate hikes, Read noted that P2P lending platforms are now competing against FSCS-protected cash savings and cash ISA accounts which are offering returns of up to five per cent. In order to remain competitive, many P2P lenders have increased their lender returns, including Assetz Exchange.

“We realised that we had to increase our yields significantly,” Read told Peer2Peer Finance News.

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“People want to get that premium so we launched two properties in January at six per cent net yield and then we did one in March at 6.5 per cent. They took a bit longer to go. Then in April, we listed a loan at 7.5 per cent and it was our fastest-selling loan ever.

“When the yield is above seven per cent, it seems that people are more likely to invest.”

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A number of UK-based P2P lenders have also increased their rates above the seven per cent mark in recent months.

Folk2Folk increased its target returns from 6.5 per cent to as much as 9.5 per cent, while JustUs raised its rates by 0.5 per cent in February, meaning that most of its loans are now targeting 8.5 per cent in returns. Also in February, Kuflink increased its target rates to 9.73 per cent, from 8.05 per cent previously. And last month, P2P pawnbroking platform Unbolted increased its target lender rates from eight per cent to nine per cent.

“Since the Bank of England put the rates up, it’s been tough,” adds Read. “If you think about it people were getting 1.5 per cent on fixed-term cash ISAs this time last year while we were offering five per cent, so we were getting lots of transfers in from cash ISAs.

“But now the Bank of England has increased its rates to 4.5 per cent and Barclays are offering cash savings accounts paying five per cent. You aren’t getting that flow from the cash ISA any more because people would rather have the protection of the FSCS.”

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