More Peer-to-Peer Lending Speculation
Over the last few weeks various respected publications have speculated that peer-to-peer lending will soon be allowed to be wrapped up in an ISA. There have been articles in The Independent and the Daily Telegraph. Both papers are not noted for printing rumours and gossip.
Now the Herald joins in, with a long and thoughtful article, that says that social lenders savers could be rewarded with tax relief.
I think that if George Osborne do what is being rumoured, it would be good for savers and good for those in need of loans at affordable rates.
Should We Jump On The Peer-to-Peer Bandwagon?
I wouldn’t tell anybody one way or other, but I would advise them to research the reputable peer-to-peer lenders, if they need to borrow money or save for the future.
This article from Julian Knight was published yesterday in the Independent.In the opening paragraph he speculates that you might be able to fund peer-to-peer lending from an ISA.
As he says, it might only be kite flying, but if it is, it is a kite armed with some serious ordnance destined for the banks.
You may dismiss peer-to-peer lending as something for nerds, accountants or gamblers, but even if you do, read the article.
If you decide to act on it, make sure you think before you leap.
It’s Not Their Money It’s Mine!
I haven’t used large amounts of cash for years, but I did a couple of times years ago, when I needed to buy a car, or in one case a truck privately.
However, I do think HSBC are being a bit heavy handed in this story from the BBC. Here’s the reaction of an HSBC customer, when he tried to withdraw £10,000.
Mr Cotton cannot understand HSBC’s attitude: “I’ve been banking in that bank for 28 years. They all know me in there. You shouldn’t have to explain to your bank why you want that money. It’s not theirs, it’s yours.”
Strangely, you’re probably better off using a peer-to-peer lender as an instant access account, as I do. If I needed £10,000 on say the 10th March, I could probably get it in returns from my Zopa account with little difficulty. But I’d have to plan what I was doing. On the other hand my credit raqting is good enough to borrow it from the sdame source, if I needed it urgently.
As peer-to-peer lenders get bigger, more common and flexible, we’ll see all sorts of innovative ways to manage our money.
Banks will probably die in their numbers, as they are incapable of innovation. I like the quote of Paul Volcker, who was once chairman of the Federal Reserve.
ATMs were banking’s only useful technological innovation in the last 30 years.
He is so right.
Will Peer-To-Peer Lending Be Allowed In ISAs?
According to this article in the Telegraph, it looks like it might happen. Here’s the first bit from the article.
Savers will be able to earn tax-free returns on peer-to-peer lending websites under plans to allow this type of investment within an Isa, The Telegraph understands.
Industry sources said a consultation on opening up Isas to peer-to-peer lending – sometimes referred to as “crowdfunding” – is expected to be unveiled by George Osborne in the Autumn Statement on Thursday.
At present my total losses from my Zopa lending is £708.93. That should be judged against total earnings of £16,009.32.
But if they allow losses to be set against tax in ISAs, then I suspect, we may see peer-to-peer losses to be set against your tax bill. So on that basis, I will be a couple of hundred pounds or so better off.
Zopa at present is lending a small amount less per day, than it was a month or so ago. So allowing losses to be set against tax, may well get more people to put their savings there.
The only losers in this case, will be the banks and building societies, who pay a derisory rate of interest.
Peer-to-Peer Lending Sites Compared
I found this page, which compares peer-to-peer lending sites across the world.
It’s interesting reading and if nothing else it shows how peer-to-peer lending sites are starting up all over the world.
There’s a rumour that a forward-thinking person is opening a toilet paper shop in the City, with a branch in the new Canary Wharf station-cum shopping centre.
You don’t need laws to curb the excesses of bankers, you need to innovate them out of a job.
Is Mark Carney A Lucky Governor?
Napoleon is reputed to have said.
I know he’s a good general, but is he lucky?
Mark Carney may or may not be a good central banker, but he certainly seems to have arrived in his new job, just as the recovery in the economy seems to be starting. It’s reported here in the Independent.
So it would seem that Cameron and Osborne, might have been influenced by Napoleon’s words, as Mark Carney does appear to have the luck to inherit good figures. Perhaps tough, Mervyn King should be given more credit, as it would seem that things got going under his stewardship of the Bank!
But we’ve seen this economy inheritance before. Tony Blair inherited a good economy and then proceeded to waste it all, so that his successor left us in the mess we are today.
It’s not that we have boom and bust, we have had a succession of governments in this country of generally a pretty good one followed by one that isn’t that good at all. I’m not going to play party politics here, as you can find bad governments of both left and right. And good and bad periods of governments that were in power for a long time. Find me a man or woman, who says that everything Margaret Thatcher or Tony Blair did was good, and I’ll show you a liar.
Perhaps we need to have more of the country run by independent organisations like the Bank of England and the BBC. Why for instance, isn’t the NHS, totally removed from the meddling of politicians? After all, how many politicians could successfully run a whelk stall?
To return to the economy, Mark Carney has said that interest rates could possibly rise next year.
They already are!
My Zopa figures are showing that their five ear loans, which were about 4.5% earlier in the year, have been rising slightly in recent weeks and now sit at 4.8%. I haven’t had a major bad debt for six months and the only blot is that my true returns are still stuck between 4 and 4.5% before tax, and are marginally down on last year.
As I believe Zopa is a stable system, where the sensible, savvy lenders, provide loans for canny borrowers of good credit, it could be a good marker as to the way the market is going.
Zopa Breaks The Million Pound Barrier
In the last seven days, if you ignore Saturday and Sunday, when they don’t normally distribute loans, they have lent out 5.7 million pounds, which works out at over a million pounds every working day.
Can this steady level of high lending be in part due to the troubles at the Co-operative Bank?
If we believe the stance of the Co-op, their typical customer will be an ethical person, who probably thinks seriously about their money. They will probably think, that bankers are responsible for a lot of problems. I won’t say anything about their politics as being sensible with and thinking about money, is not the preserve of any political leaning. I’m even sure that some people who might support some extreme parties, may well have some of the best structured finances in the country.
But with the Co-op banks troubles, are these thinking people deserting the bank before it is too late and for their saving and borrowing, they are going to the peer-to-peer lenders like Zopa.
Certainly, if I look at my lending on Zopa, the rate of late payments and new bad debts seems to have fallen compared to a year ago. This could be put down to better checking on the company’s part, but is it also due to the fact that those that think about their money are moving away from the banks.
So are the peer-to-peer lenders contributing to the demise of the Co-operative Bank?
Zopa Approach A Million A Day
I keep detailed figures about Zopa’s lending and not just the amount of money I have invested in the peer-to-peer lender.
Over the last few days, the amount of money they have lent daily is now approaching a million pounds.
Perhaps a better figure is to look at the lending over a week and even that figure is around £600,000 a day.
That is a lot of money, for a business that didn’t exist eight years ago.
An Investigation Into The Stability Of Peer-To-Peer Lending Systems
For some time, I’ve thought that peer-to-peer lending systems, and Zopa which I know best, in particular, are a very interesting proposition mathematically. I did muse on this question some time ago in Stability in Financial Systems.
My education is at Liverpool University, where I got a B. Eng degree in Electronics in 1968. I had specialised in Control Engineering and my undergraduate thesis was all about mathematical modelling.
Most of my career since has been about large business, monetary and planning computing.
But one thing that must be born in mind, is that after I sold Metier in 1985, I formed a finance company in partnership with a friend. We still talk so it must be a good relationship.
In the years I had a stake in that company, I modelled the cash flows for obvious reasons of watching risk, just as I do with my funds invested in Zopa now.
The company taught me a lot about the finance industry and it was partly for that reason, that I invested my savings in Zopa nearly six years ago. And I’ve not regretted it one bit!
As I said in Stability in Financial Systems last year, I have a feeling that Zopa is a stable system. I also think they have used this stability to their own advantage, to create their Safeguard offers.
Obviously, a full investigation would be of value to see how, if Zopa my proposition concerning the system is correct.
You would just right down the various cash flows and see how the various scenarios will affect the company.
The Peer-To-Peer Invisible Firewall
I still have some money on deposit with my bank, as I need it to pay builders and things like that, but I don’t think I will have it there for much longer.
This morning, I got a load of messages trying to target my non-existent NatWest account. As I have never had a message targeting any of my peer-to-peer lending accounts, it would seem logical that any fraudster will more likely get my bank account details than say those of the peer-to-peer lenders.
But suppose they did break into my peer-to-peer accounts, they could only transfer money back to my main bank account, which was used to load the money to the accounts. So I doubt it would do them any good.
So to get any of my money out of the peer-to-peer sites, they’d probably need to take complete control of the site and replace the software with their own.
With my software hat on, I would propose that that is virtually impossible.
So in my view in addition to the obvious security on peer-to-peer sites, there is an additional invisible firewall, due to the design of the sites.
This would make them a very unlikely target for a sophisticated criminal. They would find it easier to set up a completely bogus site and get punters to deposit money with them, for onward transmission out of the country. Hopefully, that would be spotted, given the high-profile nature of sites like Zopa, Funding Circle and Ratesetter, who have been through the mill on credibility with the media, regulators and politicians.
They can’t all be wrong!
The Anonymous Widower 