UK P2P Lending Summary 2019
There’s no ducking it, 2019 has been a tough year for the P2P sector. Here’s our industry summary …
- Following on from their 2018 issues, Lendy, a P2P platform for residential development finance went into administration in May with a loan book of over £80m in default
- In May, Bond Mason a P2P-type fund took the decision to wind down their loan portfolio, finding it harder to hit their target investor returns without taking too much risk
- In October, Funding Secure, a SME and property lending platform went into administration citing too high levels of bad debts
- Funding Circle, the SME lending P2P platform who IPO’d in 2018 saw their share price drop from £4.40 last year to below £1. Funding Circle also made the news as it was taking their lenders over 120 days to sell loan parts on their secondary markets (Proplenders currently wait on average only 10 hours).
- On 9 December, the new P2P-specific FCA regulations went live and the SMCR (Senior Managers Certification Regime) which covers the wider financial industry came into being
- One month on, around 80% of our previously ‘Active’ Lenders have categorised and passed our appropriateness assessment. Around 80% of those passed the test on their first attempt
- On the back of this updated regulatory environment we saw MoneyThing go into wind down mode and Landbay (BTL mortgages) and ThinCats (Asset Backed SME loans) withdraw from the “Retail P2P” sector but continue lending, albeit with just Institutional money
- December also saw Zopa achieve their full banking licence and are now able to run a bank alongside their P2P platform
- Despite the above, P2P lending volumes continue to grow, passing £10 billion in 2019
- Innovative Finance ISA investment accelerated in 2019, with well with over £600m invested across some 40,400 accounts as of end of Q2 2019
Proplend Summary 2019
- All-time platform lending topped £85m, with in excess of £150m property funded
- Over £45m has now been ‘returned’ to Proplenders with £38m of capital repaid and £7m of interest paid to investors
- More than £36m of commercial property-backed lending was facilitated in 2019 – up 63% from 2018
- Secondary Market (PLE) volumes have increased to £8.2m from £6.5m in 2018
- We still have super-liquidity in the secondary market, which since inception, stands at an average time to sell of 10 hours (compared to 120 days on Funding Circle)
- Proplend’s (0-50% LTV) Tranche A Investments became the new top rated investments for retail investors according to P2P specialist rating agency, 4thWay
- We now manage over 500 flexible ISA accounts ‘in house’, worth just shy of £10m (up from £6.3m in 2018)
- Proplend Wealth (our Wealth Manager portal) has over 79 managed clients who have £9.6m of active investments and has seen over £18m of funds invested since inception
- Auto-Lend volumes have increased significantly, both in number of Lenders using it 699 (203 in 2018) and by volume £9.74m (£1.43m in 2018)
- With a target return of over 5%, Auto-Lend produced average returns of 6.74% in 2018 and 7.23% in 2019 (once invested, after fees, before bad debt and tax).
- 2019 saw our first loan default, which we’re currently in the middle of our recovery process. The first charge was enforced over the securing property, with property auction proceeds covering all Tranche A obligations.
Proplend – Looking Forward to 2020
- We aim to continue to grow loan origination both through property finance broker and direct to Borrower channels
- We have held off product development in the run up to the FCA’s 9 December deadline for new regulations but are now looking at offering increased product customisation
- We will continue to develop Auto-Lend, which has seen massive growth in volumes over 2019 (580%)
- With the election now out the way, the public seem to have handed the government a clear mandate to ‘Get Brexit Done’. And on the back of our expected exit on 31 January, we anticipate that there will be greater economic certainty within the UK commercial property – stabilising and then strengthening pricing
- The government have already committed to overhaul Business Rates and overseas investors, who have sat on the sidelines for the past 3.5 years, are now starting to come back into the market. Several London agents reported a slew of deals being agreed within hours of the election results
- Whilst 2019 has definitely been the toughest year for P2P since inception, it has proved a useful ‘speedbump’ and has led to both investors and platforms to up their game
- Regulation gives increased protection for investors which is good for the whole industry and will continue to cement P2P lending as an asset class within a diversified investment portfolio. One that existing investors and financial advisors alike can more confidently recommend.
Once again, we’d like to finish by thanking all Proplend Lenders for their support throughout 2019 and offer a warm welcome to all our new Lenders and Borrowers. We wish you and your families many Happy Returns for 2020 and beyond!
Related to this post …
Platform loan and return statistics
More about flexible ISAs – Proplend’s flexible innovative finance ISA (IFISA)
More about our Tranche A only automated investment facility – Auto-Lend
Blog article: FCA Appropriateness Update – One Week To Go!
Blog article: What Can Go Wrong With P2P Property Loans?
Blog article: 2018 P2P Year In Review
