RECENT high-profile peer-to-peer lending platform collapses should provide a warning against cutting corners and taking unnecessary risk, a specialist lender claims.
Danny Waters, chief executive at Enra Group, parent company of buy-to-let and bridging loans provider West One Loans, said the failures of platforms such as Lendy and FundingSecure serve as a warning about lending practices for all firms.
“With thousands of investors potentially facing major losses, it’s understandable that P2P is now under the spotlight,” Waters said.
“In September, the Financial Conduct Authority sent letters to P2P lenders, not just in the bridging sector, over poor practices, raising concerns that firms were exposing investors to undue risks.
“It is important to note, however, that the lenders in question collapsed due to a rise in borrower defaults as a result of imprudent lending decisions.
“This acts as a warning to the whole sector and demonstrates that those who cut corners or take unnecessary risks to chase volume and market share will eventually come unstuck.”
He predicted that disruption to P2P lenders from extra scrutiny and the impending regulatory changes could boost other alternative providers in sectors such as bridging.
“As demand increases, and supply falls through less lenders being on the market, this could have a positive impact on the pipelines of established and secure lenders,” he said.
“We expect that the disruption to P2P lenders could prove positive for other lenders, such as West One, as P2P lenders must consider changes to their operating model.”
It comes as the West One Loans bridging index found annual bridging lending stayed flat at approximately £5.6bn for the third quarter of 2019.
The analysis showed that interest rates paid by borrowers remain stable at an average of 0.89 per cent, the same as the average over the first half of the year.