Peer to Peer average rate tops 5% over the last year

This week a new index was launched that tracks historic returns of major peer-to-peer providers Zopa, RateSetter and Funding Circle.

The latest data reveals that peer-to-peer investors have enjoyed an average rate of 5.09% over the last 12 months and an impressive consistent level of return ranging between 4.5% and 6.2% over the previous nine years.

Compare these numbers with the rock bottom rates on offer from bank and building society deposit accounts and despite concerns at a lack of a 100% watertight FSCS type guarantee, month by month more savers are dipping their toes into the P2P waters.

A quick look at the range of rates advertised on RateSetter on Monday showed 4.2% for 1 year, 5.8% for 3 years and 6.6% for 5 years – a far cry from the best buy fixed rate savings bond equivalents of just 1.75% for 1 year, 2.5% for 3 years and 3.03% for 5 years.

In each of these three deposit terms the very best traditional savings bonds are delivering less than half the return on offer from the fastest growing UK P2P provider.

The new index was welcomed by the key players in the alternative investment field at the unveiling on Monday, with Giles Andrews of Zopa saying that he expected the index to become a useful and impartial tool in measuring returns in the future and that it would help increase transparency in the industry.

Similarly Rhydian Lewis of RateSetter referred to the Index as ‘another building block in the emergence of peer-to-peer as a proper asset class’.

“Transparency is absolutely crucial. It’s our skin in the game, and will ensure we maintain the trust of our customers for the long term” were the words of Samir Desai from Funding Circle.

With the difference between alternative and traditional returns showing no signs of narrowing and the P2P industry now lifting the bonnet for all to take a look inside, the case for alternative lending has just got that little bit stronger.

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