Savers are being offered potential returns of 7 to 15 per cent through an innovative finance Isa which makes loans to individuals that are guaranteed by assets such as classic cars, fine wine, art and planes.
HNW Lending's Isa offers individual loans of between £50,000 and £1m to borrowers against such assets and seeks minimum investments of £5,000 to fund the loans.
The provider claims to offer Isa investors returns of between 7 and 15 per cent depending on the risk of the loans in which the investors choose to invest.
The fund allows individuals to use some or all of their annual Isa investment allowance to lend money through the peer-to-peer lending market.
To date HNW Lending has already provided more than 150 loans and claimed there has been no loss of capital or interest.
Examples of loans arranged by HNW Lending include a £100,000-plus loan against a customised Mercedes Maybach, and a 1939 Lincoln Zephyr, and a £50,000 loan against two classic stunt planes.
HNW assesses the value of a potential borrower’s valuable items and based on this it will then find a lender prepared to provide funds against the item or items.
HNW Lending will then arrange with the borrower for their items to be moved into safe storage or if it is a property, for a first or second charge to be registered.
Ben Shaw, founder and director of HNW Lending, said: “Unlike some of our competitors we take possession of valuable physical assets belonging to the people we lend to or put a charge on their property at the Land Registry, so that if they default in paying back their loan or interest we can sell those assets to repay investors.”
Helen Howcroft, managing director of Equanimity IFA, questioned whether such a "speculative investment" would not be an appropriate investment for retirement or for saving for a house.
Ms Howcroft said: "If individuals are either funding to purchase a property or funding for retirement they should be clear about how much risk they are prepared to take with their money in order to try and get their money to grow to meet their goals."
Last year Simon Massey, director of wealth management at MetLife, warned the Innovative Finance Isa may well attract many investors through the higher potential rates of return, but without them understanding the risks involved.
He said: “A major concern of advisers is the launch of the Innovative Finance isa will encourage people to use peer to peer lending (P2P) for their retirement saving.
“The P2P sector is growing strongly and offering attractive returns, particularly when interest rates are at an all-time low, and likely to remain there.
“This could put pressure on cash Isa savers to find alternative investments.”
david.rowley@ft.com
