The Traditional ISA Landscape

After years gathering dust ISA’s have experienced something of a renaissance in recent times. In fact, according to HMRC, we invested an eye watering £69 billion in them during the 2017/18 tax-year.[1]

Last years’ growth in ISA subscriptions was driven largely by an increase in investment Stocks and Shares ISA’s – an experience that may have ultimately been painful for many investors given the FTSE 100 has fallen by 9.6% since April 2018.[2]

Meanwhile, Cash ISAs still account for more than half of the total UK ISA market. Yet a quick check on a leading price comparison site reveals that the top rate of interest you can expect to earn from one of these is a “less than epic” 1.38%[3].

So, what’s the alternative?

The Innovative Finance ISA

Introduced in 2016, the Innovative Finance ISA (or IF ISA) offers investors a separate category of ISA to sit alongside the traditional Cash ISA and Stocks and Shares ISA.

The IF ISA allows investors to receive tax-free interest and tax-free capital gains from funds loaned through FCA regulated peer to peer lending platforms. IF ISAs can offer significantly better rates than Cash ISAs (albeit with increased risk) whilst avoiding the volatility of the stock market.

This new kid on the block presently accounts for less than 1% of the UK ISA market, but with £270 million invested in only its second full tax year of existence (2017/18)[4] it is rapidly growing in popularity as savvy investors catch on. As it stands though, only 6% of Brits are even aware that Innovative Finance ISAs exist. [5]

Peer to peer lending platforms offer the potential for significantly higher interest returns. In the case of The House Crowd, we lend money to property owners (commonly known as bridging loans) and to property developers with investors capital secured over the property asset via a legal charge.

Introducing The House Crowd’s Innovative Finance ISA

We are an FCA authorised peer to peer lending platform, established in 2012 and to date, we have raised nearly £100 million on our platform. Our ethos is to deliver consistent predictable returns and over the last few years we’ve succeeded in doing just that with an average net return of 9.2% p.a. on our bridging loan portfolio from 2016 – 2018.

(average returns by year: 2016 = 8.8% p.a., 2017 = 9.7% p.a., 2018 = 8.9% p.a. Remember, past performance is not a reliable indicator of future performance)

There are many different types of IF ISAs available each with their own rates, terms and conditions. Some allow you to choose a specific investment, automatically spread your investment over a large number of loans thus mitigating the risks involved others allow diversification.

At present, we offer one IF ISA which automatically diversifies your investment over our portfolio of loans secured against UK based property. We offer investors a rate of 7% p.a., though as with all investments that is not guaranteed and you should be aware your capital is at risk.

Our investments are secured by legal charges against properties that have been subject to “RICS” (qualified surveyor) valuations and thorough due diligence and, in the case of development loans, very rigorous feasibility studies.  Although there is always a risk that a borrower will not repay (however much due diligence you do) there is a physical piece of land and property that can be sold in the event that the loan isn’t repaid. This provides a very decent level of security should things not go as planned. This assurance has meant that despite making around 200 secured property loans, totalling over £75M, we have incurred zero capital losses across its bridging and development loan book to date.

However, before you take the plunge remember that investments such as this are not covered by the Financial Services Compensation Scheme (FSCS) and that, while zero capital losses have occurred to date, past performance should not be used as a guide to future performance.

You can invest anything from £1,000 up to the maximum tax-free allowance of £20,000 in any one tax year in our IF ISA and choose to receive interest payments twice per year, or if you’d prefer, reinvest your interest and benefit from the power of compounding.

If you’re not happy with the rate of return that you’re getting from your current Cash ISA or Stocks and Shares ISA, you can transfer your existing ISA to The House Crowd (free for balances of £5,000 and over).

Maybe, it’s time for you to meet the new kid on the block:  https://www.thehousecrowd.com/invest/innovative-finance-isa

Claim Your £100 Bonus*

Don’t miss out on your tax-free ISA allowance this year. Invest in a House Crowd IF ISA before 5th April 2019 and claim up to £100 bonus.

  • £50 reward for investments of £1,000-£9,999
  • £100 reward for investments of £10,000-£20,000

*Terms and conditions apply. For more information visit: https://www.thehousecrowd.com/invest/innovative-finance-isa

Your capital is at risk and returns are not guaranteed. Please read our Important Information page and full Risk Warning before investing.

Footnotes

[1] HMRC Full ISA Statistics Release August 2018: Link

[2] Yahoo Finance FTSE 100 Index, Comparison of April 2018-February 2019: Link

[3] Moneysupermarket Cash ISA’s – Correct as of 06/02/2019: Link

[4] P2P Finance News Issue 29 – IFISA Page 15

[5] P2P Finance News- Only six per cent of Brits aware of Innovative Finance ISAs: Link