P2P lenders bullish about 2019 IFISA boost
PEER-TO-PEER lenders are anticipating greater uptake into their Innovative Finance ISAs (IFISAs) this ISA season, as investors eschew low-paying cash ISAs and the volatility of the stock market.
P2P property lender EasyMoney said that it has seen “a natural increase in investors” in the lead-up to the end of the tax year on 5 April.
“Over a quarter of our ISA investment came from previous-year ISAs held elsewhere in cash, stocks and shares and IFISAs and that trend is set to continue with more customers willing to diversify their portfolio,” said a spokesperson from EasyMoney.
“Everyone knows that cash ISAs are losing subscriptions to IFISAs and offering little reward but, surprisingly, we have also seen some large losses in value from stocks and shares ISAs that have been transferred in to us.
“As investor knowledge and awareness of IFISAs continues to increase we see no reason why this will not continue to increase rapidly in the lead-up to the end of the tax year and on into the next tax year.”
Read more: Orca launches multi-platform IFISA
RateSetter is similarly optimistic about growth in IFISA uptake and has also seen inflows from ISA transfers. Its tax wrapper has attracted £175m since it was launched in February 2018.
“We saw in 2018 how, in contrast to all other mainstream investments which fell in value, investments with RateSetter continued to generate steady, positive returns averaging an annualised 4.5 per cent,” Mario Lupori, chief investments officer at RateSetter, said.
“As we go into the 2019 ISA season, even the best cash ISAs can barely match inflation and the volatility of stocks and shares continue to test investors’ nerves.”
Meanwhile, Funding Circle has unveiled research this week claiming its IFISA could help a first-time buyer save an average mortgage deposit of £24,000 six years faster than using an easy-access cash ISA.
Read more: P2P lenders record £300m intake in second year of the IFISA
The average instant-access cash ISA rate of return was 0.94 per cent in January, while Funding Circle’s IFISA offers returns of between 4.9 per cent and 6.5 per cent depending which account is used.
Currently it would take around 18 years to save the minimum £24,000 needed to meet the typical deposit on a first home in the UK, when saving £100 a month into an easy access ISA, Funding Circle said.
Read more: IFISA uptake surpasses expectations
A Funding Circle investor could reach the £24,000 goal in 12 years, assuming its rate remains the same.
“With such low interest rates available across the ISA market, setting enough money aside for a house deposit can seem daunting for young people,” James Meekings, UK managing director of Funding Circle, said.
“Lending through the Funding Circle ISA is one of many ways to diversify your investments and potentially earn higher returns – small investments have the potential for meaningful growth.
“There’s also the added bonus of lending directly to established small businesses in the UK, which creates jobs and boosts the wider economy.”