New initiative makes it possible to lend and borrow at advantageous rates
Peer to peer lending bound to be beneficial
07:59 14 July 2014
Not only will the inclusion of peer to peer in Isas spark a saving revolution but will also lead to 8pc Isa rates. Within 12 months, peer to peer lending is bound to be included in tax free Isas. Some of the other issues under considerations also include new types of Isa accounts that will be established to oversee peer to peer lending and also new peer to peer platforms that will offer other investments options.
This came after the Chancellor announced during budget that peer to peer lending was to be allowed within Isas for the first time. This gives investors opportunities to invest up to £15,000 via peer to peer platforms without being levied any taxes on the profits. These lending platforms are basically online and offer loans to borrowers bypassing the banks. This will however see the investor’s money being exempted from protection by the Financial Services Compensation scheme which offers protection to a maximum of £85,000 of an individual’s deposits in a bank.
Isa’s eligibility will be extended to include peer to peer loans in an attempt to increase the choice that savers in Isa have about their investments. This comes amid the recent increase in regulatory scrutiny of peer to peer lending with the Financial Conduct Authority taking over regulatory mandate as from next month. This has been viewed by many as a good sign that the lending industry is on the rise and is here to stay. Since this kind of investment bypasses the banks, lenders are at a better position to get a bigger return on their money while at the same time putting in mind that these interests are tax free. At the same time credit worthy borrowers are being offered a chance to access finances at a lower interest rate as compared to bank interests.