British P2P lenders expect increased investment after record rate cut
Peer-to-peer online lenders in the UK are said to be celebrating after the Bank of England recently lowered the base interest rate to 0.25% as they now expect a large amount of new investment from savers hit hard as savings rates continue to fall. Savers are expected to look at alternative finance options as a result of the rate cut because P2P platforms can offer up to 7% interest over a five-year investment. Borrowers are also expected to turn to online lending platforms as banks become “more reluctant to lend in the current financial climate”, according to Stuart Law, of online lender Assetz Capital.

The peer-to-peer loans and equity crowdfunding markets are celebrating the Bank of England's lowering of the base rate to 0.25 per cent in anticipation of an influx of new investors.

Traditional savers will be 'hit hard as savings rates plummet further', says Assetz Capital, a peer-to-peer lender that provides finance to small and medium-sized enterprises and property developers in the UK.

The company is therefore predicting both savers and borrowers will continue to turn to alternative finance companies in 'increasing numbers'.

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John Goodall, co-founder of another peer-to-peer lender Landbay, agrees and added: 'Today’s decision to cut interest rates was widely anticipated, but it is a disaster for savers. The base rate has now officially fallen below the rate of inflation (CPI), so for the first time since 2014, real interest rates are negative. If banks do decide to pass the cut on to savers, cash on deposit could be effectively losing savers money.

'Unfortunately, the outlook for savers is bleak as CPI is expected to rise further and rates are likely to remain low for a long time. It is important that people are aware of the many alternatives providing a resilient and rewarding home for their money.'

Savers who become investors by lending their money to other individuals or small businesses via peer-to-peer loans websites can earn up to 7 per cent interest at Assetz if they can leave their money tied up for five years, while a rate of 6.7 per cent is on offer at Zopa, and 5.7 per cent at RateSetter.

This compares to the best five-year fixed-rate savings account available which is from Paragon and pays just 2.3 per cent.

'Unlike traditional banks, which will be hit hard by the interest rate reductions, P2P lending platforms such as Assetz Capital, remain largely untouched by the fluctuating financial markets and continue to offer the same rates to investors and businesses as they did prior to the referendum vote and today’s base rate decision,' the company explained.

It added: 'For investors, P2P lending offers savers the opportunity to invest and gain a respectable return on their capital, meaning they no longer need to turn to measly savings accounts offered by the banks.'

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It's chief executive and co-founder Stuart Law, said: 'It’s unsurprising that interest rates have fallen today as the BoE seeks to minimise the economic effects of a Brexit. Once again savers are set to suffer as traditional savings accounts become an even less attractive option. We are expecting savvy savers to continue to turn to the alternative finance market, which has matured and grown out of the effects of the last financial downturn, and get decent returns on their capital.'

He predicts the number of business borrowers will also rise sharply as a result of the cut interest rate as 'banks are expected to become more reluctant to lend in the current financial climate'.

Law added: “For businesses in need of funding, P2P lending is becoming an increasingly attractive proposition. Fixed rate loans offered by platforms such as Assetz Capital provide businesses with a stable way to predict part of their finances, regardless of external market conditions.

'Generally speaking, loans are much safer for a business than overdrafts because banks can’t withdraw them on short notice and the large scale reduction in overdraft facilities is likely to continue even faster now driving more businesses to consider business loans to provide them more stability at a lower cost.'