Peer2Peer Finance News
The UK's first peer-to-peer finance magazine for investors and the industry
  • Home
  • News
    • Personal Finance News
    • Industry News
    • SME News
    • Global News
  • Property
  • IFISA
    • IFISA Guide
  • Video
  • Open Banking
  • Cryptocurrency
  • Features
    • Joint Ventures and Promoted Content
  • Comment & Analysis
  • What is P2P?
  • Partners
  • Events
    • Past Events
  • P2P Power 50
    • Power 50 2020
    • Power 50 2019
    • Power 50 2018
    • Power 50 2017
  • Sign up to our e-newsletters
  • Magazine
  • Directory
  • Jobs
  • My Account
    • Manage Account
    • Change Password
    • Log In
    • Log Out
shutterstock_1524251411
August 12 2020

The UK is officially in recession, is this P2P lending’s chance to step up?

Marc Shoffman Comment & Analysis, Industry News, News, Top 3 Ben Shaw, Blend Network, HNW Lending, recession, Roxana Mohammadian-Molina

The peer-to-peer lending sector is set to get its first test of survival in an economic downturn after the UK officially entered recession.

Official for National Statistics data showed the UK entered recession for the first time in 11 years after the economy shrunk by 20.4 per cent between the first and second quarter of 2020.

This pushed the UK into a technical recession.

The previous official recession in the UK was in 2009 when there was just one P2P lender in existence, Zopa.

More than a decade on, there are now more than 50 P2P lending platforms, across a mix of business, consumer, invoice finance and property lenders.

The sector has already been through a big economic test during the coronavirus outbreak and platforms have had to navigate increased withdrawal requests from investors and the need for payment breaks from borrowers.

P2P lenders have previously been bullish about a recession, highlighting that the sector was born out of the 2008 financial crisis when banks stopped lending.

The sector is now becoming a more attractive proposition than its early days as more institutional investors are interested in the asset class, alongside retail investors looking for uncorrelated returns, as Roxana Mohammadian-Molina, chief strategy officer for P2P property lender Blend Network, points out.

“Given the volatility in equity markets and the low yield on government bonds, there are not many places to park your cash if you are an investor, and high-net-worths and family offices need to deploy their funds,” she said.

“Most of them don’t have an origination and underwriting arm, so they are using P2P platforms to essentially originate loans for them to do private lending.

“That’s what we have seen ourselves as we have many family offices and HNW lenders.

“As P2P consolidates its position as an ‘asset class’, more institutional lenders want to lend.

“We are having many conversations with institutional lenders and onboarding some as well.”

Read more: Advisory experts back P2P lending sector to become mainstream investment class

Platforms may have to adjust their lending criteria to navigate the coronavirus crunch.

Ben Shaw, founder of asset-backed lender HNW Lending, said the platform changed its investment criteria as lockdown started to be “significantly more prudent.”

“We have turned down quite a number of loan applications that would have been funded pre-lockdown,” he said.

“This is primarily to protect investors against potential losses as it is far from clear how businesses would react to lockdown and then bounce back from lockdown. In addition, it is far from clear what the impact will be on asset prices, particularly property.

“The result is that while we continue to lend, we are more conservative in our lending criteria and also have preferred extending further credit to existing borrowers with good track records.”

Bank lending traditionally becomes tougher during a recession and that has already been seen in the mortgage market.

But borrowers still need to move home or fund personal or business loans so entering a technical recession may literally give P2P lenders a chance to put their, or their investor’s money, where their mouth is to demonstrate that the sector has become a viable alternative.

Read more: Savings rates reach new all-time low

LendInvest welcomes stamp duty and planning permission changes FSB calls for ‘most pro-business Budget ever’ as recession strikes

Related Posts

ThinCats John Mould

Industry News, News, Property, Top 3

CrowdProperty unveils board changes and hunt for CFO

Business Analytics and Data Management System (DMS) giving key insights for corporate strategy. Concept with expert analyst building visualization with KPI and metrics from database information

Industry News, News, Top 3

4th Way gives its views on Zopa and Funding Circle returns

geld

Global News, Industry News, News, Top 3

October heralds record December despite Covid-19 crisis

Popular posts:

  • Government responds to P2P fraud query
  • The alternative lenders accredited for CBILS
  • SME lender warns many companies will not survive
  • Funding Circle to offer first and second draw PPP loans
  • Investors urged to look at ISA options ahead of…
  • The risk hunter: 4th Way’s Neil Faulkner
Back To Top
  • Home
  • Contact
  • About
  • Team
  • Advertising
  • Subscribe
  • Privacy
  • T&Cs
  • Disclaimer

Follow Us on Social Media

© Peer2Peer Finance News 2020
• Additional design by