LENDING Works’ Innovative Finance ISA (IFISA) has hit its £1m limit within just 24 hours of its launch, due to “unbelievable demand” from investors.
The peer-to-peer lender had anticipated an influx of new customers eager to take advantage of tax-free earnings before the end of the tax year, so it had limited initial investment to £1m to avoid a mis-match between investors and borrowers.
Read more: Lending Works launches IFISA
“We didn’t want to take in £10m and leave the money waiting to be matched, or lower rates or credit criteria to lend the money out,” Matthew Powell, director at Lending Works, told Peer-to-Peer Finance News.
“However, we didn’t expect it to take just 24 hours to reach the limit. There’s been unbelievable demand from investors.”
Powell said that the £1m cap was not a “hard limit” and that the actual amount of new money transferred into the IFISA was around £1.5m.
On top of that, a further £1m had been transferred from other ISAs, as the final amount is not always confirmed by the last ISA manager prior to the transfer.
Read more: 23 firms now approved to offer IFISAs
Powell said that Lending Works is hoping to re-open to new investors next week.
“Over the next few weeks, we’re doing things with existing affiliates and brokers that should boost loan origination,” he said, although he declined to give more details on the plans.
The spike in demand for Lending Works’ IFISA reinforces industry predictions that the tax-free wrapper could boost awareness of P2P. However, attracting borrowers to meet this increased investor interest is likely to be the greater challenge for the sector this year.
“I think it’s inevitable that rates will go down slightly – that will be a trend across the industry,” said Powell.