5 Key Points from the FCA P2P Review
At the end of July, the Financial Conduct Authority (FCA) published their proposals for P2P regulation following an investigation started in 2016. In general, these proposals will mean much more thorough regulation of the sector and aim to achieve greater protection for investors’ money. Kuflink achieved FCA authorisation in 2017 and have committed ourselves to market-leading due diligence, and providing a transparent approach to investing.
Just in case you missed it, here are 5 key points from the FCA review that all P2P investors need to know:
1. Managing Returns and Interest Rates
In order to make P2P investing more transparent for investors, the FCA have proposed a number of new regulations with regards to returns. These include making sure that target returns are achievable, that returns reflect risk, and that platforms fully understand and account for credit risk.
2. Extended Marketing Restrictions
In response to the sometimes complex risks posed by some loan-based investments, there are plans to implement a more extensive set of marketing regulations for P2P platforms.
3. Minimum Information Standards
Although many platforms go to great lengths to ensure sure their investors are well-informed about every opportunity, there are some firms that fail to provide much information. Under new rules, the FCA plan to implement minimum requirements to help investors make better decisions when it comes to managing their portfolios.
4. Strengthening Wind-Down Procedures
Regulated P2P firms are already required to have a wind-down procedure, but this currently doesn’t have to take certain practical challenges (such as the IT systems that underpin investments) into account. The FCA plan to make these considerations compulsory so that, should the worst happen, platforms are fully prepared and investors are protected as far as possible.
5. Additional Regulations for P2P Firms
As the sector has grown, business models have become increasingly more complex, and the current regulations do not fully account for this. The FCA plan to impose more general regulations that reflect the market as it currently is, and are adaptable to cover future innovations too.
You can read the report in full here
Last-Time Buyers: The Forgotten Housing Crisis
First-time buyers are central to the vast majority of discussions about the UK housing crisis, owing to a lack of affordable housing and the huge difficulties they face to take their first steps onto the property ladder. Much emphasis is placed on the need to build new homes for them to ease the dissonance between supply and demand, although research shows another promising solution; the so-called ‘last-time buyers’.
Last-time buyers are those of an older generation looking to move once and for all, usually to a smaller and more manageable property. They are mostly retired and struggling to keep up with the continuing demands of looking after a family home – research by Legal & General found that they hold more than one trillion in property wealth in the UK alone.
63% of those aged 55+ own their homes outright, which often means that the majority of their wealth is tied up in property. Making the decision to move to a new house not only frees up funds that can be used to enhance their golden years, but it also frees up properties for the abundance of first-time buyers struggling to find a family home.
However, a lack of properties suited to last-time buyers presents yet another stumbling block for the UK housing market. 26% of those aged 55+ reportedly considered downsizing in the past 5 years, yet only half of those went ahead with the move. So, why did half choose to stay in their current home despite having concerns over the size, cost and suitability of it?
Unsurprisingly, the answer is commonly that last-time buyers are unable to find the right property. Whilst for some this means a dedicated retirement community, for most it simply means a smaller house in an area close to their family and friends. It’s a relatively small ask, but one that virtually no-one is listening to.
Although last-time buyers are almost never mentioned in housing strategies, a greater focus on their needs would make a significant impact on availability and liquidity within the UK property market, not to mention a decreased reliance on strained resources such as care homes and hospitals.
Data taken from: https://www.legalandgeneralgroup.com/media/2437/30042018-lg-ltbs-draft-v9.pdf
Interest Rates Increased by Bank of England
The Bank of England announced yesterday that they are raising interest rates from 0.5% to 0.75%. Whilst this is good news for savers, who are likely to benefit from improved returns, many are sceptical of the effect that it will have on borrowers; those on a low income will be hit hardest by inflated mortgage and loan repayments.
Savers
Now is a great time for savers to shop around for the best deal, as banks will be reviewing their rates. However, high street banks are unlikely to pass the full increase over to customers, and returns on savings products will remain modest as ever. According to figures released by the BBC, ‘no easy access savings account at a major high street bank pays interest of more than 0.5%’.
For those looking to get more from their money, it’s prudent to consider how a lower risk investment might help to achieve this. First time investors may wish to look for property-backed opportunities, with medium interest rates and a low minimum investment whilst they build confidence – for example, Kuflink offer up to 7.2% interest pa* and with over £21 million invested through their platform to date, there have been 0 investor losses!
Borrowers
Although previous rate rises have often not led to an equal rise for borrowers, they do tend to mean an increase in repayments. The BBC states that, for a £150,000 variable mortgage, the annual cost is likely to increase by £224 – not an insignificant sum for those already struggling.
So, what can you do if you’re concerned about how you’ll meet this sudden increase in outgoings?
One strategy is to take time to map out your financial aims, and how you’ll achieve them. Consider how budgeting, saving and investing could move you closer to your goals. Even if increasing your income isn’t a viable option, there are plenty of ways to make your existing funds work harder for you!
*Capital is at risk. Past performance does not guarantee future results.
