Marketplace lending expected to top £6bn this year, says report

However, report warns sector will face a significant test of its risk management procedures, loan servicing and recovery practices should economy worsen.

Marketplace lending is expected to top £6bn this year but lenders will face a significant test of their risk management procedures, loan servicing and recovery practices should the economy worsen, a new report warns.

The Marketplace Lending Index report compiled by loan data specialist Brismo in conjunction with Link Group offers an overview of the peer-to-peer and marketplace lending market.

The report says that gross marketplace lending is likely to grow 16 percent from £5.3bn to £6.2bn from 2018 to 2019.

It said the first half of 2019 saw £3bn in new gross lending, the highest six-month total on record, an uplift of 22 percent compared to the first half of 2018.

Property lenders were the key drivers of growth, accounting for three-fifths of additional lending. But the report pointed  out that loss rates were weighing net returns.

The peer-to-peer and marketplace lending sector has endured a recent rocky period.

In May, peer-to-peer platform Lendy fell into administration, leaving 20,000 customers in limbo, some of whom had invested six-figure sums.

Prior to that, Manchester-based peer-to-peer lender Collateral went into administration after it emerged that it was not authorised by the Financial Conduct Authority (FCA).

In July this year, Funding Circle halved its growth forecast for the year after suffering a sharp drop in demand for loans, dealing another blow to the peer-to-peer sector.

The sector has also had to deal with new rules which limit marketing and require lenders to have stronger governance.

The report pointed to a slower growth in net lending, which it said indicates the sector is maturing.

It said its analysis of the net lending of three marketplace lenders-Ratesetter, Zoppa and Funding Circle- totalled £191m in the second quarter of 2019, which was down from £252m in the first quarter of the year.