Auckland-based mortgage broker Squirrel will launch New Zealand’s third peer-to-peer lender, after being licensed by the Financial Markets Authority.

From September, 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.”

Squirrel wants to lure investors in a low interest rate environment by offering rates higher than banks are offering on term deposits.

Mr Bolton is a former ANZ 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.

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