PEER-TO-PEER lending hit a record high of £3bn in the first half of the year but losses are also increasing, a report warns.
The latest Marketplace Lending Index from the Link Group, found that marketplace – or P2P – platforms are collectively lending £16m a day.
The index estimates that the value of lending could total £6.2bn for the entirety of 2019.
Property lenders, including Landbay and LendInvest, accounted for three-fifths of the additional lending in the first half of the year at £848m, up by 54.5 per cent compared with 2018.
Business lending totalled £1.1bn in the first six months of 2019, a rise of 14.5 per cent annually, while new consumer lending was up 9.4 per cent to £990m.
Despite an increase in lending, returns have fallen to the lowest on record, according to the research.
Investors are receiving 3.8 per cent on average, down from the peak of 6.3 per cent in 2016.
This was attributed to rising loss rates, which the report blamed on a move away from contingency funds.
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“P2P and marketplace lending has witnessed a tumultuous year so far. The sector has been beset by controversy, not least by Lendy’s fall into administration,” Mark Davies, managing director of Link Mortgages Services, said.
“Economic and political uncertainty has provided a more troubling backdrop for consumer and business lending too, and losses have risen. In spite of all this, marketplace lending continues to grow as platforms cover the funding gap left by traditional banks.
“More change is coming. Tighter regulation requires clearer disclosure on performance, more robust risk management, and restricts lending to retail investors. This will reassure the large-scale institutional investors that are vital to platforms building a more diverse funding base, and it should support long-term, sustainable growth.
“However, as losses rise, and the potential for an economic downturn looms on the horizon, it is clear that marketplace lenders are heading into new territory. Should we see the economy slow further, the risk management, loan-servicing and recovery practices they have in place are likely to face significant testing across the board for the first time.”