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Link Group: Property drives marketplace lending to new high

Peer-to-peer marketplace lending hit a record £3bn in the first half of the year despite loss rates in the sector according to Link Group’s latest Marketplace Lending Index.

The research predicts that peer-to-peer gross lending to total £6.2bn in 2019 which has been driven by property sector.

The value of gross marketplace lending conducted by tech-enabled platforms rose by more than £500m in the first half of the year, up 21.6%.

This followed high lending of £1.5bn in Q2 2019, up 24.3% year-on-year.

The sector’s performance in the first half of 2019 was powered by a period of growth for property lenders who accounted for three fifths of the additional lending in the first half of 2019.

Mark Davies, managing director of Link Mortgages Services, said: Peer-to-peer and marketplace lending has witnessed a tumultuous year so far.

“The sector has been beset by controversy, not least by Lendy’s fall into administration.

“Economic and political uncertainty has provided a more troubling backdrop for consumer and business lending too, and losses have risen.

“In spite of all this, marketplace lending continues to grow as platforms cover the funding gap left by traditional banks.

“More change is coming. Tighter regulation requires clearer disclosure on performance, more robust risk management, and restricts lending to retail investors.

“This will reassure the large-scale institutional investors that are vital to platforms building a more diverse funding base, and it should support long-term, sustainable growth.

“However, as losses rise, and the potential for an economic downturn looms on the horizon, it is clear that marketplace lenders are heading into new territory.

“Should we see the economy slow further, the risk management, loan-servicing and recovery practices they have in place are likely to face significant testing across the board for the first time.”

Paul Smee, chair of the Peer-to-Peer Finance Association, added: “As sectors evolve and expand their influence and impact, and as regulators become more interested in them, there is an almost inevitable interest amongst stakeholders in how standard descriptions and measurements can similarly evolve.”

Matt Adey, director of economics at British Business Bank, said: “We know that high-quality information and reporting is important for the effective operation of smaller business finance markets.

“Reports on particular finance types provide a valuable contribution to the market’s understanding of how these areas of funding are performing, and we welcome its publication today.”

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