Climb the Property Ladder with P2P Lending

By AltFi on Thursday 11 September 2014

Alternative Lending

Peer-to-peer lending could be the way forward for first time property buyers.

In 12 months prior to June 2014 property prices in London have surged by 19.3% in London – according to data from ONS. This has meant that the amount needed for a deposit has shot up. The latest figures from LSL Property Services backs this up – showing that the average first time buyer slapped down just over £30,000 for a house in the South East of England in July.

Over the first half of 2014 more than £500 million of new money was lent via peer-to-peer lending platforms, with more than 66,000 retail investors offering loans to individuals and small business – according to recent research from the Peer-to-Peer Finance Association.

With returns of over 5 per cent on offer at the major platforms, the peer-to-peer sector’s popularity looks set to increase and could see the public raise a deposit of £31,000 in five years by starting with an initial £11,000 and adding an extra £250 a month.

Despite this, Danny Cox – Head of Financial Planning at Hargreaves Lansdown –  is wary of savers viewing peer-to-peer lending as a straightforward alternative to cash products. In his opinion, you don’t get equity-like returns without taking on equity-like risks. Cox reckons that the first place most people will look is the NISA tax wrapper, with its new £15,000 annual allowance. Cox said:

“For shorter time horizons, usually less than five years, you’re looking at cash Isa products.”

But with rates on cash ISA products so low, it’s difficult to get a return much above inflation at the moment – which is why peer-to-peer lending has to become a more widely-considered option for first time buyers. Danny Cox’s reservations about peer-to-peer lending aside, his advice for those sizing up the peer-to-peer lending space is to go with a well-known platform.

Sign up for our newsletters


Your daily 7am download of all things alternative finance and fintech.

Fintech and alternative finance headlines with an exclusive Editor's Note each week. Delivered Monday at midday.