OCTOPUS Choice is targeting £200m of cumulative lending in its first two years of operation, as it looks to build its presence in the property market.
The peer-to-peer lender, which was spun out of Octopus Investments in April 2016, is planning to capitalise on the demand from yield-hungry investors in a period of historically low interest rates.
The platform offers property-backed loans to investors, offering four per cent returns, which are underwritten by another lender under the Octopus umbrella, Octopus Property.
It raised around £50m in its first year of trading and has now facilitated over £130m of borrowing across nearly 200 deals.
“The volatility of the stock market and low interest rates mean that a lot of people want to benefit from these investments,” said Sam Handfield-Jones, head of Octopus Choice.
Several P2P platforms have acknowledged the difficulties in matching this influx of funds, but Handfield-Jones said he felt “100 per cent confident” that the platform would be able to originate enough good quality loans, “as the market is so large”.
Unlike most relatively new P2P lenders, Octopus Choice can benefit from its sister company’s track record, network and expertise.
Octopus Property, which underwrites Octopus Choice’s loans, launched in 2009 and has lent over £2.6bn with a default rate of less than 0.1 per cent.
Loans are secured against property at conservative loan-to-values (LTVs), currently averaging at 61 per cent.
In the case of a Brexit-induced slowdown in the property market, these conservative LTVs will help protect investors, Handfield-Jones said.
“If the LTV is 61 per cent, the property has to lose 39 per cent of its value before an investor loses money, which should help us weather any changes in the property market,” he said.
“Furthermore, Octopus Choice has first charge on the property.”
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Octopus Choice was launched in consultation with financial advisers and over 400 are already using the platform.
Handfield-Jones said that the firm’s strategy going forward is “more of the same”, namely “getting the message out there” by talking to IFAs and working with service providers such as legal and compliance firms to help educate advisers about the risks.
Octopus Choice launched its Innovative Finance ISA in August and is in the process of building an app aimed at both financial advisers and investors, which it is hoping to launch by the end of the year.