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Government To Consult On New Peer-To-Peer Lending Isa

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http://www.bbc.co.uk/news/business-29653476

The government is considering setting up a separate tax free individual savings account (ISA) for people who want to lend out money.

The new ISA would be for people who lend money via Peer-to-Peer (P2P) borrowing sites.

In would be in addition to the two longstanding ISAs for cash and shares.

Peer-to-Peer websites, like Zopa and RateSetter, accept money from savers which they then lend out to individuals or businesses.

Often they attract an above-average return, albeit with more risk. Lenders can, in theory, lose their money, if the borrower is unable to pay it back.

The idea has snowballed: £1.8bn has been loaned through such sites so far, and the industry believes including such lending within ISAs will boost it further.

"This consultation marks a tipping point for the UK P2P market - it is estimated that ISA inclusion will see the sector grow from £2bn to £45bn within the next few years," said Rhydian Lewis, the chief executive of RateSetter.

Would an ISA match the same rate you can get going direct?

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"This consultation marks a tipping point for the UK P2P market - it is estimated that ISA inclusion will see the sector grow from £2bn to £45bn within the next few years," said Rhydian Lewis, the chief executive of RateSetter.

That will crash the interest rates paid to lenders then.. 20x the amount of money available to lend to the same number of borrowers.

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That will crash the interest rates paid to lenders then.. 20x the amount of money available to lend to the same number of borrowers.

Probably true to some extent but more borrowers will appear as the interest rates fall so it should balance out somewhat.

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For a few years they let the payday lenders make hay, doing so was in alignment with government policy - create more debt and keep people spending money they do not have to game the GDP figures. The payday lenders themselves could have grown big enough themselves to crash the system - those interst rates would have created 100,000's or millions of defaulters within a few years.

Maybe they want P2P to fill the gap. Look out for a radical change in risk and loss ratios if so as the worst of the credit risk crowd join the party.

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