It has been a tough decade for savers with interest rates having hit extreme lows in the wake of the financial crisis. The Bank of England slashed the base rate to just 0.5% in 2009 and therefore generating income has become tough. This has led to individuals having to really shop around and seek out new ways to ensure that their savings work as hard as possible for them.
Combine these low-interest rates with economic growth slowing and financial conditions tightening, and investors also face capital risks as stock market volatility increases.
At times like these, there is a place in every portfolio for investments that offer increased certainty and security. The British Pearl loan investment was designed as a possible solution to these problems.
The British Pearl loan investments are designed to try and tackle the problems faced right now by savers, namely; capital risk, low income and medium-term uncertainty. Let’s outline each of these in turn.
When investors buy a loan with us, they are acting like a bank and providing a mortgage that is secured against a specific property. The size of the total loan is from 50% to a maximum of 70% of the property purchase price (this is called the loan-to-value or ‘LTV’). This means that the property price would have to fall by around 30% to 50% before any capital would be at risk. Their investment takes priority to be repaid first, before any Share Investors, when a property is sold. A higher LTV will offer a higher interest rate.
The income investors receive is a fixed rate for each property investment and accrues each day that they are invested in a loan. Since a Loan Investor is in a similar position to a bank providing a mortgage, the rates they receive are higher than regular saving products. Depending on the LTV and the period they commit to, we offer interest rates of between 3.75% and 4.40% per year.
Our loan investments initially commit them to an investment term of between 3 and 5 years, although this may be shorter or longer if we felt it was in the interests of our customers to amend the Investment Exit Date. In addition, there is the option to exit early through our Resale Market.
All of this means that, together with our transparent financial information, British Pearl investors are able to make sound investment decisions that offer different levels of income and risk over time. Investors can customise investments with us, to build a portfolio that best suits their needs.