Factoring Blog, 12th February 2016

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An article on the BBC website this week quotes former City regulator Lord Turner making a couple of interesting statements, one about interest rates, the other about peer to peer lending.

Whilst at first sight the two may seem only distantly connected the link is in fact a close one.

Lord Turner told the BBC that “interest rates in the UK may not go up beyond 2% by 2020”. On the basis that Base Rate has been at 0.5% since March 2009, a rise to 2% within the next 3 years would represent a sizeable increase, but, in my view an inadequate one.

With rates so low comes a desire for savers to put their money to work and much funding has been put into the peer to peer network via an ever growing array of funders offering facilities to both individuals and businesses.

I cant comment on peer to peer finance as it affects consumers but within the SME finance market there are plenty of such funders. The comment made by Lord Turner is “The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the bankers look like lending geniuses,”

This comment has, not surprisingly,  upset the P2P lenders who are quick to point out their robust credit policies and track record so far.

I havent seen enough P2P facilities in action to make representative conclusions. One or two I have seen would make traditional bank managers wince whilst others have been written on the basis of a seemingly sound credit. However the views of a former city regulator need to be considered. Only time will tell the accuracy of his predictions.

In the meantime those putting their own money into any type of peer to peer lending should think many times before investing, and then think again.