Squirrel to launch P2P service, offering up to $70,000 in loans
By Suze Metherell
Aug. 10 (BusinessDesk) - Squirrel, the Auckland-based mortgage broker, will launch New Zealand's third peer-to-peer lender, after being licensed by the Financial Markets Authority.
From next month, Squirrel Money will offer consumers secured and unsecured personal loans up to $70,000 via "person-to-person" loans, it said in a statement. Borrowing rates will be determined by an auction type bidding process, where the more bidders in an auction the lower the interest rate on the loan, and the return to the investor, will be.
Peer-to-peer lending was introduced under the new Financial Markets Conduct Act, which came into effect last year, providing a regime to match lenders and borrowers, with a $2 million cap on the amount allowed to be borrowed. Harmoney Corp was the first to receive a licence, followed by LendMe, which hasn't opened its doors yet.
Squirrel will charge borrowers a flat fee, $250 for unsecured loans and $500 for secured, while its maximum loan limit is double the $35,000 Harmoney offers. The peer-to-peer lender says its point of difference is that it doesn't have backing from banks and will offer investors credit protection by setting aside interest payments into a reserve fund.
"Unlike other P2P offerings in the market, we aren't funded by a bank to deliver a bank-style offering," managing director and owner John Bolton said. "All our loans will be genuine 'person-to-person' loans."
Harmoney, which calculates its interest rate based on the borrower's credit rating, launched last September with $100 million in capital funding from Heartland New Zealand and three other undisclosed investors. In January, Trade Me Group, New Zealand's biggest online auction site, paid $7.7 million for a 15 percent stake as part of the peer-to-peer lender's $10 million capital-raising, joining the listed bank.
Squirrel wants to lure investors in a low interest rate environment by offering rates higher than banks are offering on term deposits. According to Interest.co.nz banks are offering five-year term deposits interest rates around the 4 percent mark, depending on the amount invested. Harmoney offers investors a 12 percent risk adjusted return on loans that are broken up into $25 "fractionalised notes" which attract interest.
Bolton is a former Australia & New Zealand Banking Group general manger, overseeing the bank's retail product division. He has since set up Squirrel Mortgages, which claims to be Auckland's largest mortgage broker, writing $800 million in mortgages a year.