Yield-hungry investors switch their cash to peer-to-peer lenders

Peer-to-peer lender, RateSetter, says 56 per cent of money invested with it is from savers withdrawing their money from their bank savings accounts.

Yield-hungry investors are understandably frustrated with earning next-to-nothing on their cash held at their banks, with interest rates at historic lows and likely to stay that way for the foreseeable future.

With the the advent of peer-to-peer (P2P) lenders, online platforms that match investors and borrowers, investors can get up to three times the interest paid by term deposits.

P2P lenders charge borrowers lower rates of interest than they would pay on bank loans, while lender-investors earn higher interest than they could get with a bank term deposit.

RateSetter figures show that younger people – those in their 20s and early 30s – are strongly favouring one month terms.

It runs counter to their portrayal in the media as being more likely to fritter away their money on smashed avocado on toast than save it.

“These young investors are seizing the opportunity to make their money work hard,” says Daniel Foggo, the chief executive of RateSetter.

“For a variety of reasons they may want ready access to their money, so the one-month market gives them a stable, attractive return of around 4 per cent a year easier access to cash if they need it.”

P2P lenders have a long way to go before they gain a significant share of the savings market enjoyed by Australia’s banks, but they are growing quickly.

To read more about peer-to-peer lenders, please click on the link below…

Source: Yield-hungry investors switch their cash to peer-to-peer lenders – The Sydney Morning Herald