Bridging lender Wellesley & Co is launching a peer-to-peer lending arm to fund its short-term loans and offering investors returns of up to 7 per cent.
Wellesley & Co says investors will earn between 5.5 per cent and 7 per cent a year depending on the length of their investment.
Peer-to-peer investors will see their money used to fund bridging and development property loans of up to £1m at an average loan to value of 62 per cent.
The lender will retain a portion of every loan and shareholders have committed £5m to match investors’ money.
Wellesley is also starting a provision fund with an initial £100,000 from shareholders to help protect peer-to-peer investors from any losses.
In the event of a default the security will be realised and sold with peer-to-peer investors paid first.
Not-for-profit firm The Open Data Institute estimates the UK’s peer-to-peer lending market has trebled in size in just three years. It is currently worth £550m and forecast to grow to £1bn by 2016.
Wellesley chief executive officer Graham Wellesley says it is targeting retail investors looking for better saving returns.
Brightstar Financial managing director Rob Jupp says: “The principle of peer-to-peer lending can be really useful in funding short-term loans. Lenders like West One and Montello are almost entirely funded by peer-to-peer lending. Investors just need to be sure the institution is a bona fide operation.”