Crowdfunding is growing strongly, according to the Peer2Peer Finance Association, with predictions that the industry will break through £1 billion in funds raised by the year end.
Many come to crowdfunding as investors, in search of top savings rates. Deposit-account investors certainly have had a dismal time of it . The average deposit-account rate quoted by the Building Societies Association is 0.76 per cent for instant access accounts – after leaving money in for long enough to qualify for the meagre bonuses sometimes on offer.
So savings rates have continued to fall in 2014 despite the scaling back of the government’s Funding for Lending scheme initiative at the end of January, writes the financial commentary website, This Is Money.
Support for the scheme, which helped kick-start the housing market, was wound-down after an announcement in November 2013 meaning banks and building societies were instead incentivised to focus more on lending to small businesses.
The Bank's £80 billion scheme helped drive home loan rates to record lows last year, but at the same time depressed returns on savings. The scheme has been blamed for making the plight of savers - already suffering a record low base rate – worse. It has given banks access to cheap funding for loans, making them less reliant on having to attract savers' deposits via competitive rates.
Experts predicted savings rates would rise - they were wrong
At the time of the announcement, a wave of experts predicted there was only one way for savings rates to go – and that was upwards, while mortgage rates were expected to rise.
Money&Co., a loan-based crowdfunder that prides itself on having conservative credit-analysis criteria and a rigorous process, is clearly going after the savings market in an aggressive way.
Money&Co. quotes “financial information website Moneyfacts has found average rates across virtually all savings products have continued to fall.
"The best rate quoted by the site for instant-access accounts is 1.4 percent with the WestBrom, a building society.
Higher returns are available for investors willing to tie their capital up for five years. 2.7 per cent is offered by Aldermore or 2.65 with investment giant Investec. At the time of writing, Money&Co. is offering two B+ graded investments, with prospective gross yields of 8.5 and 8.6 per cent over four and five years respectively. That’s three times the best bond yield on offer.”
The battle for retail savers’ hearts, minds and piggy banks is set to be protracted – definitely one to watch.