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Business Agent

UK banks’ lending to property developers halved in 2 years as peer to peer lenders take over

20 June 2016 16:00


Recently, Saving Stream, a property peer to peer platform released data showing that bank loans to property developers fell from £32.5bn in April 2014 to £14.6bn in April 2016. The figures show that property development lending from the banks has halved. We have seen figures like this before just like when we saw banks’ lending to SME’s drop in Q4 last year and these figures have a lot to say.

Liam Brooke, co-founder of Saving Stream said: “The days when banks dominated the property development lending market are well and truly finished- it’s now just as likely to be a debt fund, high net worth individual or a peer to peer lender that’s gets the spades in the ground. This kind of lending is something that the banks would still like to do, but the regulatory restraints that have been put on them mean it isn’t viable for them”.

With peer to peer lenders making a huge dent in the market, banks and traditional lenders are now starting to see some real competition. Since the huge crash banks are under constant pressure to minimize risk in debt and to keep the capital requirements healthy. Taking this into account and the fact that peer to peer lenders are offering competitive rates, we have seen a clear shift across from traditional lending to alternative finance.

Peer to peer lending is now playing a major role in the market and is not to be dismissed. We are also seeing a rise in lenders as well as borrowers, with companies such as Saving Stream offering returns up to 12% on a secured property loan, the attraction is clear. It’s great news for borrowers as there are now plenty of alternative options when it comes to funding and rates and products will continue to become more competitive. Wellesley, who are a little over 2 years old have lent over £320m. So you can see the growth in the market compared to the decline in bank lending.

It’s a very exciting time for the peer-to-peer market and with growth continuing, where will it be in 5 years’ time? Do remember that alternative finance and lending does come with risks. Look to see if the provider you are interested in has a ‘provision fund’ and is regulated by the FCA (financial Conduct Authority). Your capital is at risk when lending.

Lee Nicolaou

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