Marketplace lending hit a record £3.0bn in the first half of 2019 despite record loss rates in the sector, according to new research from Link Group and Brismo.
 
Link Group’s latest Marketplace Lending Index revealed the value of gross marketplace lending conducted by tech-enabled platforms – which includes crowdfunded or peer-to-peer loans – increased by 21.6% to more than £500m in the first half of the year.

Link Group said this had followed unexpectedly high lending of £1.5bn in Q2 2019, which was up 24.3% year-on-year. Marketplace platforms are collectively lending £16m a day, the Index said.

The research suggested the sector’s performance in the first half of 2019 was powered by an exceptional period of growth for property lenders, which accounted for three-fifths of the additional lending in the first half of 2019, with property lending totalling £848m in the first half of the year, reflecting a rise of 54.5%.

The figures contrasted with the performance of the wider mortgage market, which Link Group suggested meant marketplace lenders are increasing their market share among traditional or mainstream lenders.

Link Mortgages Services managing director, Mark Davies, 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.”

The Index also showed business lending had totalled £1.1bn in the first six months of 2019. This represented a rise of 14.5%, slower than the 17.4% growth seen a year ago, which Link Group suggested could reflect the uncertainty that Brexit is placing on decision making for businesses and investment.
 
Rupert Taylor, Chief Executive of Brismo, added: “Whilst marketplace lenders are working hard to adopt new FCA requirements, there is in parallel an increasingly widespread acknowledgment that investors of all types need to be able to compare performance.
 
“The Link Marketplace Lending Index demonstrates how performance can be compared, and we will continue to develop our methodologies to provide investors with the insights they need to make commitments to the lending asset class.”

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