Following several years of low-interest rates, a recent series of base rate rises have had a knock-on effect on the wider financial services market, and several peer-to-peer lending platforms – including Folk2Folk – have raised their investors’ returns.
Warren (pictured) predicts that this higher-rate environment will continue for several years, and has urged investors to make good choices with their money during the current ISA season.
“With increased interest rates it’s time to get switched on,” says Warren.
“A lot of people have been switched off because of the low rates historically – we knew that the low-interest environment wouldn’t last forever. Now is the time to start making the most of your allowance again as we expect interest rates will probably stay high for the next couple of years.”
Folk2Folk has maintained an average annual return of 6.5 per cent on its IFISA since inception. However, recently the platform increased its target rates to between 7.5 per cent and 9.5 per cent. In fact, depending on availability and the loan investment chosen, returns could reach as high as 10 per cent.
Warren believes that the income-generating aspect of the Folk2Folk IFISA is what makes the product most attractive to investors. However, he adds that investors are just as interested in doing social good.
“What’s interesting in our investor base is there’s a complete split among those who care what their money is being used for and those who are just looking for the return,” says Warren.
“It’s a fairly equal split – lots of people want to put their money into something that makes a difference.”
Folk2Folk’s IFISA investments are used to fund small- and medium-sized businesses and property developments in regional parts of the UK, helping to enable the flow of capital and level the playing field between the urban and rural parts of the country. Its cumulative lending volume now stands at £650m, £53.5m of that having been invested via IFISA accounts.
Folk2Folk has the highest IFISA minimum on the market, at £20,000. Warren says “there is always a temptation to reduce that level” but adds that it also works as a filter to ensure that only sophisticated investors and high-net-worth individuals are investing via its platform.
“Because we have a minimum investment of £20,000, we are going for the more sophisticated investor,” he says. “That’s key for us because we want people to understand the risks that are involved in their investments.
“Our investors have confidence in our approach to risk and how secured their money actually is.”
To date, the platform states there have been no capital losses for its customers in the 10 years it’s been trading.
The platform has seen transfers in from other platforms this year, including Assetz Capital. In general, the majority of ISAs transferred into the platform have come from cash ISAs.
“Savvy investors will always be looking around to see what’s out there, so it’s heartening to see that we’re still being chosen for transfers,” Warren said. “In fact, investors who transfer their ISAs to us usually go on to open a new ISA account with us as well, and from there continue their annual ISA investing via Folk2Folk.”
As well as increasing returns, the platform’s default rate remains low, which Warren credits to a strict due diligence process. What’s more, the platform continues to be profitable. This makes it a great option for suitable investors seeking a new home for their ISA money this financial year.
This article was initially published by Peer2Peer Finance News on on 23rd March 2023 and can be viewed here.