NZ's first and biggest peer-to-peer lender says goodbye to p2p market

Closed sign on shop door

Harmoney announced yesterday that they are pulling the pin on retail investments, and going forward, would be funding their loans through wholesale lending only. The announcement stated, "After careful analysis of Harmoney’s business model and the company’s strategic direction we have made the decision to close our online lending platform to any new retail lending from 1 April 2020".

It seems that this decision was a long time coming. Operating as a peer-to-peer lender wasn't working, and the business found themselves lending their own money. Even though Harmoney opened their doors back in 2014, it was only last year that they recorded their first after-tax gain.

However, for every fallen soldier, a new hero will emerge. Squirrel’s chief executive John Bolton stated in their press release yesterday that "when one door closes, another opens. While other p2p lenders in the NZ market may be reducing opportunities for retail investors, Squirrel are doing quite the opposite."

Squirrel has been making some extensive changes to their investment platform that will bring more opportunities for investors to earn better returns, positioning them as a market leader. Those who may feel like they've lost out may actually find themselves in a much better position with Squirrel’s investment model.

Bolton also mentioned that from next month, Squirrel investors will be able to invest in Kiwis buying property as well as the usual personal loan investment class already available. Squirrel has been in the mortgage business for over 10 years, writing around a billion dollars in mortgages each year, which means this is a natural progression for the business. Squirrel has already started funding a number of mortgages which will become available to invest in, using the secondary market. Already, Squirrel are showing their innovative ideas and claiming their place at the top of the market.

In their press release, Squirrel also addressed what sort of returns their investors could expect in their peer-to-peer platform. "By nature, the borrowers we'll be funding for a peer-to-peer mortgage will carry lower risk than personal loan borrowers, which in turn affects the investor returns. When we launch with the new investor options, we expect interest rate returns to be:

  • 4.0% p.a. (variable rate) for home loans for residential property
  • 5.0% p.a. (variable rate) for business property loans for small developments or property investments
  • 6.0% - 7.0% p.a. (fixed rates) for personal loans investment classes

How does this impact me?