What’s the deal?
Wellesley & Co., a peer-to-peer provider, has joined forces with MoneySuperMarket to offer £50 cashback to all new customers who open any of its fixed rate accounts before midnight on Monday, April 21.
As well as the headlined 18-month bond which pays an annual equivalent rate (AER) of 5.65%, this exclusive deal also applies to Wellesley’s 6-month bond which pays 3.79% AER, its 12-month bond which pays 4.75% and its three, four and five-year bonds which pay 6.12%, 6.37% and 6.58% respectively.
With the exception of the six and 12-month deals, on which interest will have to be paid on maturity, you will be able to choose whether you want your interest to be paid monthly or as a lump sum when the fixed rate term ends.
You must invest a minimum of £2,500 to qualify for the cashback offer and the £50 will be paid directly into your holding account (set up once you have registered). You can then choose whether to invest the money into your new account or withdraw it.
Wellesley is a peer-to-peer provider. These work differently to regular banks and building societies as they lend your money directly (typically) to consumers or small businesses. But with Wellesley your cash will be lent to small and medium-sized investors in residential and, sometimes, commercial property.
Who’s it good for?
For anyone toying with the idea of peer-to-peer saving in bid to combat the long-time low rates on standard savings accounts, this £50 offer is a cracking deal.
You’ll have to be willing to tie up your money for the duration of the fixed rate account, the minimum of which is six months. You may be able to access your money before the agreed term ends through the provider’s Early Access facility, but only if another lender is willing to take your place at the same rate and term. And you may still have to sacrifice some interest.
As you can opt to receive your interest monthly, Wellesley’s 18-month, three, four and five-year accounts are good for anyone looking to use their savings to provide or supplement an income.
Finally, this deal will appeal most to internet-savvy savers it’s only available online.
From April 1, the peer-to-peer industry came under regulation from the Financial Conduct Authority (FCA) which means it’s now governed by more consumer-friendly rules. But your cash will still NOT be protected by the Financial Services Compensation Scheme (FSCS) which would pay back the first £85,000 per saver in the event a traditional bank or building society go bust.
That said, Wellesley has its own provision fund which is held by an independent security trustee, and currently holds nearly double the funds needed for savers to be reimbursed (budgeting on a 2% default rate). Wellesley also says it’s a safe bet as your money is backed by the tangible security of bricks and mortar which can easily be sold at auction. Find out more about where your money goes in our article, Are peer-to-peer firms all the same? and make up your own mind.
You’ll also need to declare the interest you earn in a self-assessment tax return. This is because, unlike standard savings accounts which pay interest net of tax, peer-to-peer providers including Wellesley, pay returns gross – without the tax taken off.
What’s the verdict?
So long as you understand the arguably small risks with peer-to-peer lending, you are aware of where your cash is going to be lent – and when and how you can access it – this exclusive offer from Wellesley is a great deal. As well as getting some decent returns on your cash, you’ll get a £50 booster just for signing up.
And should you become a peer-to-peer convert, you will soon be able to hold your account within an ISA wrapper which means you won’t have to pay tax on any of the interest you earn. This welcome announcement was made in the 2014 Budget, although finer details of how and when this will happen have yet to be confirmed.
Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.