I try to publish a round up of my peer to peer investments each month and their annualised rates of return, which involves going into each platform one by one and copying the data into my spreadsheet. This month I’m trying to combine it with doing the self assessment tax return which is taking a lot longer than I expected. Different platforms appear to treat certain cashback as taxable and others not. For example, most consider the cashback you receive as an incitement to join as a new customer as non-taxable. However, at least one treats it as taxable (e.g. Zopa, after multiple mails to customer service to clarify). Landbay is in no-mans-land, considering it non-taxable but including it by mistake as taxable on their tax statement export. Some consider the cashback interest you receive while a loan is funding as non-taxable and others as taxable (e.g. Landbay).
So this month I won’t have time to do the annualised return calculations, but I am writing a separate tax self-assessment post in tandem to this one that I hope will be helpful to others. I have an accountant for my freelance LTD company that will also process my self-assessment so there will be a second eye.
I’ve made quite a few changes recently, trying out some new P2P lending platforms and reducing on others. Unfortunately I’ve had a bit of bad luck with late repayments/defaults (more below).
My P2P Investment Snapshot as of 1st June 2017
*Note: this should not be considered a recommendation or investment advice, it’s just my personal investment breakdown.
Individual Platform Comments
The House Crowd
I’ve only made one investment in The House Crowd, mainly because of the £1,000 minimum per loan. My whole P2P portfolio is <£25k so it is hard for me to put so much in just one loan. Last November they offered a £50 cashback on any investment for a short period of time which persuaded me to take the risk. To maximise the benefit of the cashback I decided to invest in the shortest loan period possible (6 months) at 10%, which with the bonus would work out at a 10% return for 6 months or 21% annualised.
The House Crowd had a problem with the first loan paperwork, so offered to switch me to another loan which had even better security whilst honouring the original 10% rate. The six month term finished last week (25th May) but went into default. The House Crowd will pay bonus interest during the default period (12% per annum as opposed to 10% per annum). I’m not so worried about repayment as the Loan-to-Value was reasonable and it was a standard buy-to-let property that they can probably sell quite easily.
Throughout this process The House Crowd customer support were really good, they kept me updated and sent out a ~900 word email the day after the default explaining everything.
Basset & Gold
I invested in Basset & Gold’s IF ISA on April 4th, just at the cut off for the tax year. They run their investments in batches finishing towards the end of the month, so regardless of when you invest you don’t start accruing interest until the start of the bond period. I received the bond certificate in May, and should have the first monthly interest payment mid June.
At one point I had about £3,500 invested in Funding Secure but now that is down to around £1,500. The gross rates are very high and there are some good loans on there, but I don’t like the lack of updates when loans miss their repayment dates or go into default. Last September I invested £150 into a risky loan which has now gone into default. It is a 2nd charge at 63% Loan-to-Value, but as the process seems to be dragging on so long I’m worried I may lose a significant amount of capital. As it drags on, the first charge holder’s interest will be adding up and the second charge will only be paid after all of the first charge’s capital+interest. The loan paid 16%, so it was a high-risk, high-return bet.
I’ll increase my investment in Funding Secure again as soon as I see some positive things coming out of the defaults/late loans. They will probably get my IF ISA subscription this year if it recovers.
Ablrate came out with a number of interesting new loans and have a lot of opportunities on the secondary market too. I’ve read some criticism on the P2P Independent Forum about loan repayments being a few days late over the long weekend, but compared to some other platforms they could be a lot worse. There was one pub loan that they released in an interesting way. Instead of releasing as a straight first charge loan at 75% LTV, they split it into two:
- a first charge 50% LTV paying 12%, interest only with capital repaid at end of term
- a second charge 75% LTV paying 14%, amortising (paying back interest + capital each month)
The second charge was sold out really quickly but the first charge took a lot longer to fill. Investors were willing to take much more risk for a slightly higher return. I’d planned to split an investment between both, but seeing how quickly the second charge was selling I decided to put all of the money into the second charge. Then, a few weeks later I sold all of the second charge at a 0.7% premium and bought the first charge at a 3% discount on the secondary market.
This strategy was a bit of a gamble, I could have easily been left holding the 75% LTV 2nd charge for 4 years.
I’m looking forward to seeing the first ‘buy-to-sell’ opportunity close (SPV 74), as these were a really exciting addition to Property Moose and potentially offer high returns. On the secondary market, activity for me has been lower, I haven’t sold as much as the early days. I think some of this was due to Property Moose updating their share value calculations to more conservative estimates.
Lendy (formally called Saving Stream) is less liquid to sell loans on the secondary market. Now, once a loan gets to around 100 days remaining I’ll check the investment queue to see if a large queue is building up. I’m only investing in loans that I’d be happy to hold to term. Even so, if I see a large queue building I’m tempted to just sell it, there’s plenty of other opportunities on other platforms at the moment.
MoneyThing are powering ahead with new loans and untypically there is a lot available for sale on the secondary market. Good for new investors who want to diversify across a lot of older investments on day one. Not so good for existing investors who had assumed they’d always have instant liquidity. Could the swelling of the secondary markets on platforms like Lendy and MoneyThing be attributed to a large supply of fresh primary market loans, or could it be more cautious investors selling off before the next election?
There were a few changes to P2P cashback/referral offerings, probably the biggest change I’ve seen this year:
- Growth Street have now closed their £100 referral offer.
- WiseAlpha have a new offer: between £25 and £250 depending on investment offer
- Flender have a new offer: 10% cashback on first investment over £1,000
- Archover have a new offer: £75 for an investment over £5,000
- Lendy now have a £50 cashback offer for investments ofver £1,000
You can find further details of these on the P2P Cashback page.