INNOVATIVE Finance ISAs (IFISAs) will make up 30 per cent of peer-to-peer investments this tax year and as much as half by 2018, Stuart Law has predicted.
Law, chief executive of Assetz Capital, said the IFISA will make P2P a big attraction in 2017.
“Alternative finance has certainly started to make its mark with savvy investors, but the biggest attraction to date will be the IFISA,” he said.
“We predict that this will attract a huge amount of capital onto the main platforms and represent as much as 30 per cent of all capital inflows to P2P platforms this year, assuming all large P2P lenders such as Assetz Capital get approved before the end of March 2016, and perhaps as much as 50 per cent in 2018.
“It is likely to be mostly new and additional money invested, not replacement of non-tax-sheltered cash.”
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He echoed industry analysts in predicting smaller players may struggle to attract necessary lending and would need to merge: “We expect a degree of consolidation and some to drop out of the market altogether,” Law said. “Considering this, investors will need to research platforms carefully.
“A keen focus on platform strength and loan security is more vital than ever before in these more uncertain times whilst still reaping the potential rewards P2P lending brings.”
He also forecasts a shift towards secured finance and variable rates if the Bank of England raises interest rates. “The desire to invest in secured loans will increase amongst lenders and professionals,” he explained.
“The largest P2P investment trust, P2PGI, has stated its intention to focus on secured loans as evidence that this model is highly desirable, directly as a way to mitigate potential risk of issues arising from Brexit and any other economic deviations and surprises.
“This ensures capital has solid security behind it whilst also potentially attracting healthy returns as at this part of the cycle onwards, unsecured lending to consumers and businesses could start to be tested in the not too distant future.”