Risk summary for P2P agreements or P2P portfolios

Estimated reading time: 2 min

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

1. You could lose the money you invest

  • Many peer-to-peer (P2P) loans are made to borrowers who can’t borrow money from traditional lenders such as banks. These borrowers have a higher risk of not paying you back.

  • Advertised rates of return aren’t guaranteed. If a borrower doesn’t pay you back as agreed, you could earn less money than expected. A higher advertised rate of return means a higher risk of losing your money.

  • These investments can be held in an Innovative Finance ISA (IFISA). An IFISA does not reduce the risk of the investment or protect you from losses, so you can still lose all your money. It only means that any potential gains from your investment will be tax free.

2. You are unlikely to get your money back quickly

  • Some P2P loans last for several years. You should be prepared to wait for your money to be returned even if the borrower repays on time.

  • Some platforms may give you the opportunity to sell your investment early through a ‘secondary market’, but there is no guarantee you will be able to find someone willing to buy.

  • Even if your agreement is advertised as affording early access to your money, you will only get your money early if someone else wants to buy your loan(s). If no one wants to buy, it could take longer to get your money back.

3. Don’t put all your eggs in one basket

  • Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.

  • A good rule of thumb is not to invest more than 10% of your money in high-risk investments.

4. The P2P platform could fail

  • If the platform fails, it may be impossible for you to collect money on your loan. It could take years to get your money back, or you may not get it back at all. Even if the platform has plans in place to prevent this, they may not work in a disorderly failure.

5. You are unlikely to be protected if something goes wrong

  • The Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover investments in P2P loans. You may be able to claim if you received regulated advice to invest in P2P, and the adviser has since failed. Try the FSCS investment protection checker here.

  • Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn more about FOS protection here.

If you are interested in learning more about how to protect yourself, visit the FCA’s website here. For further information about peer-to-peer lending (loan-based crowdfunding), visit the FCA’s website here.

The Rise of Build To Rent

Market Reports 10 Aug 2022
  • Facebook logo
  • LinkedIn logo
  • Twitter logo
  • Email icon

BTR is an increasingly popular market within the private rented sector

Number of homes in the BTR pipeline in London alone

83,000

Build to Rent (BTR), an emerging market within the private rented sector (PRS), is a relatively new concept: it offers purpose-built professionally managed residential development schemes designed with the sole intention of appealing to the rental market, as opposed to long-term ownership. In most cases, these schemes usually offer longer tenancy terms and are typically built and managed by institutional investors and property companies.

 

Originating in the US, the concept was first introduced in the UK in 2012 as a solution to the rise in renting and to the private rental sector’s traditional poor reputation and low quality. Since then, we have witnessed a significant and steady growth in this segment of the market. As of last September, there were 83,000 homes in the BTR pipeline in London alone[i], as growing numbers of people seek quality, well-managed rental housing at affordable prices. This trend is not surprising since BTR schemes offer both long term returns for the investor, and generally higher security and overall quality of rental accommodation for the tenant. Research published by Knight Frank last year shows investments in the BTR market hit £2.35 billion in the first half of 2021 - over £1.27 billion in Q1 and an additional £1.08 billion in Q2. This represents an 80% increase in investment volumes compared with at same period in 2020 and is a figure that is expected to be greatly surpassed this year[ii].

Furthermore, the BTR market has shown surprising resilience throughout the pandemic and holds potential to meet resident needs for home-working environments and outdoor space. With the shift in priorities following the pandemic, the pressure to meet housing demand and with ongoing soaring house prices[iii], demand for BRT has been understandably on the rise. Another very interesting trend within the BTR market growth is its strong regional spread. According to Knight Frank, some 70% of the funds committed to BTR in the first half of last year were for schemes outside of London[iv], reflecting investor confidence in the fundamentals which underpin those regional markets, as well as an increase in the number of development opportunities being brought forward outside London. Knight Frank estimated by the middle of last year that 58% of all pipeline schemes of 75 units or more (either under construction or with planning) will be delivered in regional markets. This trend is both interesting and very much aligned with our view of the UK regional market. At Blend, we have been and continue to fund development schemes across the regions and have very supportive views on markets such as Manchester and Birmingham, especially amid the government’s Levelling-Up agenda.

 

Blend is an active development finance and bridging lender across the UK regions. We support SME property developers and small construction companies who are building residential and mixed-use schemes across the UK, with a particular focus on innovative, energy-efficient, and ESG-compliant schemes. Investment in BTR very much aligns with our short- and long-term view of the market. Therefore, we actively support developers who are active in that market. If you are a property developer looking to fund a BTR scheme, get in touch with a member of our expert lending team so that we can assess your funding needs and help fund your scheme.

Blend is a specialist development finance lender providing investors with a full stack service from loan origination and underwriting to transaction execution and portfolio management. For more information, please visit www.blendnetwork.com or email Melissa Turnbull, Operations Manager, at [email protected]

BLEND Loan Network Limited is authorised and regulated by the Financial Conduct Authority (Reg No: 913456).

BLEND Loan Network Limited is registered in England and Wales. Registered office: Evelyn House, 142 New Cavendish Street, London W1W 6YF.

Don’t Invest unless you’re prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2 mins to learn more.

Register for industry insights

Sorry. There was an issue.