We are not alone. Money&Co. has been in the vanguard of seeking extra security for our lenders, and focusing on property-backed peer-to-peer (P2P) loans. This means we take a legal charge on property and ensure that the loan-to-value figure offers good security.
For example, in a recent string of webuyanyhomes.com loans, the loans were typically 64 per cent of the valuation of the property. So the property market would have to fall a long way before our lenders, as holders of the first charges on the underlying properties, would have had security problems. All these loans have been performing faultlessly, by the way.
Our friends at P2P Finance News note property-backed IFISAs as the coming force in P2P, with Money&Co. among the early adopters. See this article, stating our intention from the Money&Co. News story of 4th January this year.
In March, Money&Co helped one of its borrowers – Grounds Investment – to bring to market a property-backed IFISA which provides loans for residential developments in major German cities.
Meanwhile, the recently-launched Westway IFISA aims to solve the problem of the under-served supported housing sector by offering an alternative source of funding for developers, while targeting 8.5 per cent in annual returns for investors.
The growth of the P2P property market has coincided with a slowing in the traditional lending market, as well as an ongoing shortage of housing across the UK. This has encouraged borrowers to seek out alternatives to the banks, while investors are attracted to the asset-backed returns which can be made within the tax-free IFISA wrapper.
8% Yield Loan – 78% Subscribed
The latest property-backed £250,000 loan from Seascape is now more than 78 per cent subscribed. This A-rated tranche yields 8 per cent gross, at a fixed rate for five years. As is the case with earlier tranches of credit, we have used our best efforts to ensure the truth of the assertions made, but cannot warrant their absolute accuracy. Fuller detail is available to logged-in members.
A Process Guide To Innovative Finance ISA Investment
Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee). That figure is the result of almost £15 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.