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UK peer-to-peer loans hit £3.15 billion (and counting)

The UK peer-to-peer industry has issued over £500 million of new consumer and small business loans since April this year, according to industry body, P2PFA.

These figures represent the fastest quarterly growth rate the industry has seen, and takes the total value of UK peer-to-peer loans to £3.15 billion.

Zopa’s loans account for almost £1 billion of that figure; we’ve lent over £950 million since 2005, and are set to lend our billionth pound sometime in August.

Growth in 2016 and beyond

The numbers speak for themselves. Peer-to-peer lending is a significant presence in the UK consumer and SME loans space and this is only likely to increase. Christine Farnish, Head of the P2PFA, predicts that the total loan value could reach £4 billion by the end of the year.

The government announcement that April 2016 will see the introduction of a new Innovative Finance ISA (with its unfortunate nickname, the ‘Iffy’) is a further demonstration that peer-to-peer is moving into the mainstream. According to Christine Farnish, peer-to-peer growth is likely to be ‘further stimulated’ by the new ISA.

Interest rate impact?

The other 2016 development we’ve all had our eye on is whether interest rates will rise from their current historic low of 0.5%. At an event last week, Mark Carney, Governor of the Bank of England, hinted strongly that this might come at the turn of the year.

At the moment, one of the key selling points of peer-to-peer is that the returns for investors are much higher than those offered elsewhere. However, as Giles Andrews, Zopa’s CEO and co-founder explains, an interest rate rise is unlikely to affect peer-to-peer’s appeal:

“Any rise in base rates will benefit both our lenders and borrowers as bank spreads will increase as they always do as interest rates rise. Commentators have been talking about the prospective increase in bank profitability as interest rates rise and that will have to be paid for by consumers, making our alternative proposition even more compelling.”

In any case, Mark Carney talked about rates only rising to 2 – 2.5%, which is still half of the average annualised return offered by Zopa.