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Peer2Peer Finance News | September 23, 2019

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Lower inflation could boost P2P investments

Lower inflation could boost P2P investments
Tim Evershed

THE SURPRISE fall in the UK’s pace of inflation during September could boost investments through peer-to-peer platforms, according to lenders.

The annual rise in the consumer price index fell to 2.4 per cent from 2.7 per cent during the previous month, the latest data from the Office for National Statistics (ONS) showed. Most analysts had predicted a month-on-month increase to 2.8 per cent.

However, P2P lenders welcomed the latest figures as they predicted a growth in spending power would fuel investments.

“The drop in inflation coupled with the fastest growth in basic wages in over a decade is welcome news for UK families who will now see a boost in their available income and saving and will be looking for ways to invest their savings,” said Roxana Mohammadian-Molina, chief strategy officer for Blend Network.

Read more: How is the rise in inflation affecting investors?

“P2P, when seen as a great tool to access investment opportunities easily, is set to benefit from this ‘wealth effect’ as savers look for products to invest their money in.

“We’ve already seen an increase in the number of new private lenders who are new to P2P and looking to boost the return on their savings.”

As the Bank of England tends to raise interest rates when inflation is rising this drop could mean they stay on hold at 0.75 per cent. This could also increase the attractiveness of P2P platforms.

“The fall in inflation rate is welcome, but it is still nibbling away at savers’ money, reducing its spending power,” said John Battersby, head of communications and policy at RateSetter.

“We are seeing more and more people choosing to do something about this by putting their money to work and accepting some risk in exchange for better returns.”

Read more: Fresh blow for savers as inflation rises for first time in eight months

The data came just a day after labour market statistics found that last month the pace of wage growth rose to 2.6 per cent, its highest level since the financial crisis.

The inflation data suggests rise in labour costs are not yet fuelling a sustained increase in inflation, said the ONS.

“Despite the decrease in the headline inflation rate, there are signs inflationary pressures are building in the UK economy,” said Ben Brettell, senior economist at Hargreaves Lansdown.

The ONS said yesterday that wage growth reached a ten-year high in the three months to August, and today’s data showed input prices for companies increasing at 10.3 per cent, largely driven by a higher oil price.”

Read more: Falling inflation sparks interest rate warning