The £3.15bn boomtime for lend-to-save

SAVERS poured £500 million into so-called lend-to-save schemes over the past three months — with £3.15 billion now invested in this booming industry.

Lend to save — or peer-to-peer, to use its proper name — is when a saver loans their cash to another individual using a website. They are paid interest in return and get their original money back after an agreed period.

The investment has become increasingly popular as interest rates on high street savings accounts have remained at rock bottom.

From next year, the investments will be eligible to be held in an Isa. A new type of account — the Innovative Finance Isa — was unveiled in the Budget earlier this month.

It is expected that £4 billion will be invested in these loans by the end of the year.

Christine Farnish, chairman of the Peer-to-Peer Finance Association, says: ‘This growth shows that consumers’ trust in peer-to-peer lending is improving and the introduction of the new Isa should build on that further.’

However, there are still concerns that savers don’t understand the risks of peer-to-peer lending. As with any type of investment, returns are not guaranteed, your money is at risk and it is not covered by the consumer compensation scheme which protects some other types of investment.

Andy Caton, director at Yorkshire Building Society, says: ‘Investing in peer-to-peer can offer the possibility of strong returns, but people need to be fully aware of the risks.’