Octopus Investments has created a peer-to-peer lending platform, as it looks to give investors more choice through the Innovative Finance Isa.
The fund management company, which manages over £6bn of assets, has launched Octopus Choice, which targets a return of around 5 per cent through short-term residential property loans, typically between six and 18 months.
Due to the speed with which the loans are arranged, they charge higher rates than standard mortgages, which boosts investor returns.
This announcement comes just months after the firm decided to launch a new online lending product, which sought to address the scepticism and scarce uptake of P2P products among the advice community.
Richard Wazacz, head of Octopus Choice, said: “With interest rates hitting a new low and inflation continuing to rise, it’s becoming ever harder for everyday investors to achieve real returns.”
He claimed the new platform is the answer to these conditions, and aims to offer above-inflation interest and to reduce investment risk by investing in more than 20 loans.
“We feel we’ve created a product that gives investors the opportunity for solid returns on their money without venturing into equity-based investments,” Mr Wazacz said, claiming this would be ideal for those with money to invest but nowhere they feel comfortable investing it.
The platform will also permit transfers of existing Isas so investors can earn interest through eligible peer-to-peer lending products through the so-called ‘P2P Isa’, which was launched back in April.
The platform is powered by an underwriting team that has loaned over £2bn since 2009 and which had a default rate below 0.1 per cent.
Octopus also invests alongside investors, contributing 5 per cent to every loan in order to provide an additional layer of protection in the event of default.
The minimum monthly investment is £10 and the maximum is £2m, and interest is paid monthly.
Investor capital is secured against residential property assets with an average LTV of around 60 per cent, therefore providing a 40 per cent cushion against capital loss in the event of default
Investors can also request to withdraw at any time with no charge or penalty.