UK rate rise could spell trouble for some P2P platforms
PRESSURE is mounting on the Bank of England to raise interest rates, but the chief executive of peer-to-peer lender Blend Network says this could be a problem for platforms offering lower yields.
The central bank held the base rate at 0.5 per cent last month but surprised the market with a 7-2 vote, while minutes from the meeting hinted of tighter monetary policy in May. The nine policymakers had voted unanimously to hold rates at February’s meeting.
Blend Network’s Yann Murciano told Peer2Peer Finance News that rising interest rates, which will boost cash savings rates, will put pressure on P2P platforms that offer investors low single-digit returns.
“If you have a platform offering three or four per cent – for them it’s quite bad,” he said. “If you can get two per cent from a cash savings account, then why take the extra risk for only a little bit more?”
Blend Network offers returns of around 12 per cent, which it says gives it a buffer against rate rises. Murciano says that high yield is what attracts investors to switch from equity markets. February’s sharp fall in equities – which saw the FTSE 100 drop by 3.5 per cent in intra-day trading – saw investors flock to Blend Network, according to Murciano.
“When the market came off last month we saw a lot of people subscribe immediately because they wanted to get some yield,” he said. “Debt is much less volatile.”
This story appeared in the April issue of Peer2Peer Finance News, now available to read online.