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Online marketplace lenders to pass on savings from rate rise

As the potential for a base rate rise from the Bank of England increases, online lenders look to beat tradition and pass on benefits to consumers.

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The Monetary Policy Committee is expected to raise interest rates on Thursday, amid increased anticipation after the Bank of England signalled that an imminent rise was possible back in September.

Weighing in on the discussion, Peter Behrens, the co-founder of RateSetter, has suggested that online marketplace lenders will do more than their traditional counterparts to push any positive results from the rise to consumers.

It has been more than 10 years since the last time the BoE raised interest rates, during which time the consumer savings landscape has changed significantly.

For example in 2016, the size of the online loan securitisation market was estimated to be at $4.3bn, compared to the height of the mortgage-backed securitisation market at $8.1bn.

Behrens stated: “Since the last time rates rose, the savings sector has been transformed. We are not confident that traditional players will respond and pass on rate rises to savers. But online marketplaces like RateSetter will respond much more quickly, funding a new equilibrium as the monetary policy environment changes.”

However, Nick Harding from Lending Works is less optimistic about the possibility of benefits for consumers, given the high likelihood that inflation will remain above rates.

He commented: “I do not believe Lending Works will be affected by tomorrow’s rate rise, or indeed any rate rises while the BoE rate remains at levels that are unattractive to savers and investors. “

“[They] have had a terrible time generating yield over the last nine years, and while we predict this is unfortunately not going to change for the foreseeable future, we do hope to offer them an attractive alternative.”

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