Her Majesty’s Daily Telegraph Supports Zopa
It’s all in this article here. What will Disgusted of Tunbridge Wells say, as he’s been with NatWorst since he qualified as a solicitor? The article says this about saving and borrowing.
While competition in the current account sector remains stifled, there has been innovation in the savings and loans market, much of it spearheaded by new technology. Zopa, and other peer-to-peer lenders, are prime examples. This company, which launched in 2005, puts those who have money to lend in direct contact with people who need to borrow, effectively cutting out the banks altogether.
Although Zopa takes a fee for arranging this service, the fact that it doesn’t hold the money itself, so doesn’t need to build extensive reserves to cover bad debts, means the rates on offer are far more attractive to consumers. For example, over the past year lenders had earned around 5.5pc on their money, and this is after charges and defaults have been taken into account. Given that the average savings account pays less than 1pc, it is not hard to see why such sites have proved attractive. For those borrowing money, the interest rate is typically a fifth lower than with a high street bank, although most peer-to-peer sites do have strict lending criteria, which means that if you have been turned down by a high street bank you won’t necessarily be able to borrow money through one of these sites. These criteria mean that, to date, the default rate is just 0.5pc.
Zopa may be the biggest peer-to-peer lender by some margin (it has now arranged loans worth £212m) but it is facing competition from RateSetter (which also provides a “default fund” to help cover lenders’ losses) and Funding Circle, which arranges loans for small businesses.
I only think that the peer-to-peer lenders have one serious problem. And that is that politicians bring in banking legislation, that effectively stops peer-to-peer lending in its tracks. However the banks haven’t really shown any good reason why they should be protected from upstarts.
The Affect of NatWorst on My Zopa Account
I track what is in my Zopa account every morning.
Since the 12th of June, I have had 28 accounts in arrears. On the 27th, this number rose by four. I thought it would have been worse as probably between a quarter and a third of all UK personal bank accounts are eight RBS, NatWorst or Ulster Bank.
It will be interesting to see, if this was a NatWorst effect or just natural in the scheme of things. I think it’s a mixture of both, as after all the turn of the month, is always a time of large numbers of payments. My number of bad debts hasn’t moved since the 7th of June.
Zopa in the Belfast Telegraph
Zopa has a good plug in the Belfast Telegraph today.
It’s probably opportune given the problems at Ulster Bank, which has a high presence in the province. On the other hand, if people haven’t got a working bank account, how are they going to repay their loan?
Peer-To-Peer Lending Gets a Plug in the Scotsman
The Scots like to think they are canny and one even thought he was prudent, so this article from the premier Scottish newspaper, the Scotsman should be very much welcomed by the peer-to-peer lending industry or at least its three major players; Zopa, Funding Circle and Ratesetter.
The Simon Gompertz Effect
Yesterday, the BBC published a well-researched article on its web site, by its Personal Finance Correspondent, Simon Gompertz, about peer-to-peer lending. I commented on it here.
It was the only article on the subject picked up by Google yesterday and featured on the BBC’s most read list of articles on its web site for most of the day.
As a member of Zopa, I follow their figures closely, which are easily accessible to any borrower or lender. The amount of money that lenders have demanded from the site has risen significantly.
At 09:00 on Saturday, the money demanded by prospective borrowers was £9.4million, whereas at the same time today the figure was £14million. Over the same period, the amount of money made available by lenders was £18.2million on Saturday and £12.1 today.
Doing a crude calculation means that £6.1million of lenders money has been allocated to borrowers and there are another £5million or so that could be lent. Zopa’s team of credit experts will be kept busy on Monday, checking all these new borrowers. And probably rustling up some more funds to lend.
Is this all the effect of one well-written article by Simon Gompertz on the BBC?
There’s another good article in the Observer today. I suspect that Zopa’s figures will be just as interesting tomorrow.
Update on 11th June 2012 at 08:00
Total demand is now £15.8million up and funds available are £11million. This works out as a swing of £13.6million over the weekend.
It did look at a few other weekends and typically, there is a swing between £2.5million and £4.5million.
Whatever the truth is, something extraordinary happened! And it is all good! Unless of course you’re a banker!
BBC Discusses Peer-to-Peer Networking
It does at last seem that personal finance correspondents like the BBC’s Simon Gompertz, are getting the hang and idea of peer-to-peer lending. He has just written this article about it. Here’s the first three paragraphs of the piece.
Lending via three websites that link savers with borrowers – bypassing the banking system – has topped £250m.
The “new age” finance carries no protection for deposits, but is being tipped as a serious threat to traditional banks.
The peer-to-peer sites are led by Zopa, which has lent more than £200m since it started in 2005.
I’ve been using Zopa since 2008 and would say that anybody who uses the Internet competently, has a basic knowledge of finance and is prepared to research how they handle their money, should consider Zopa or one of its competitors. So if you can’t be bothered to read Simon Gompertz’s article, then peer-to-peer lending is not for you.
On the other side of the coin, if you have a good credit record and need to borrow a few thousand pounds for say a new car or a house extension, get a quote from one of peer-to-peer lenders and compare it with what your bank offers.
Always ask a lender what happens, if I want to settle up early. Many lenders make their money by imposing extra charges at this point.
Wonga Bad, Zopa Good?
This question was asked in an article in Finextra.
It’s a good read.
One thing Zopa has proved, is that when dealing with finance, you can work a sort of co-operative or Big-Society idea, using the standard techniques of the Internet. So in some ways the good thing about Zopa, is the way it has created a comunity around its business, which educates and then brings people to that business.
The Sun Discusses Zopa
I was a bit surprised at this story about peer-to-peer lending that appeared in The Sun.
It is a fair factual article, which should make readers think about what they should do with their money.
The Dates Muck Up Zopa Returns
Some weeks ago, I said that my Zopa return since the beginning of the year was over 9 %. It’s now dropped to 8.73 %.
It’s nothing to worry about, as the large payments made on the first of the month, are stuck in the system, due to the four day weekend.
Should We All Pay Bank Charges?
The UK is one of few countries in the world, Australia and India are others, where if you keep your account in credit, you effectively get free banking. There is an article in the Telegraph, describing how Andrew Bailey of the Bank of England feels this banking model should end, as it encourages things like mis-selling to get the money in other ways.
I always remember my friend, David, who rose to be Buisiness Banking Director of a major clearing bank, said that they made a third of their profits, by lending money overnight.
Now I want with a bank that doesn’t apply charges for direct debits and transfers, keeping most of my money in Zopa. In other words, I own the overnight money at a better rate than my bank will give me.
The banks are going to hell, and I’ll make sure, that I’m not in their handcart
The Anonymous Widower 