TRue return on 1 year loan after allowing for the2% cashback

Aren't you lending £98 and getting £108 back?

With the property loans, you effectively get a 2% coupon at inception, and after the 1% fee, 7%/12 every month, all on your unchanged loan notional of £100. Without tax considerations, this is about 9% yield. 

However because the cashback is not taxable, it is higher, depending on your tax bracket. for 45% taxpayer the equivalent yield is around 10.64%.

'Is' is correct. You are lending £100 and getting £109 back, it is just that the first £2 comes back very quickly, without fees taken and without a tax liability. For the 20% tax payer who wishes to keep out of higher rates, these property loans are very useful, especially if you can churn them before they are due to repay - taking zero risk and suffering no taxable losses.
If the 2% cashback contributed almost nothing to lender returns, they why would FC do it as an incentive? Especially since they are giving away 40% of their fee from the borrower - that certainly affects FC's margin and the benefit has to go somewhere. It goes to the lender.

At the end of the year you get back the amount you loaned. You think you loaned £98 but they give you back £100. It's that £2 you've forgotten.

AAAAAAAAAAAHHHHHHHHHHHHHHHHHHHH

Min (and others) thank you for your patience. I invest £98 upfront, but at year end I get back £108 (£100 capital + £8 interest), which means I make £10, thus my return is £10/£98 = 10.204%

Finally got round to doing the calculations on these. Taking in to account:
- Flows out (purchase cost)
- Fees - 1% of the principal
- Bonus - 2% paid on go live
- Interest (using the normal FC method of 1/12 of the headline rate charged on the outstanding principal per month)
- Lag - I have assumed 14 days from the date you invest to the loan going live
- Repayment - assumed to be exactly 12 months after the live date.

For the 12 months at 8% the EAR is 9.1%.
For the 18 months at 9% the EAR is 9.6%.

The lag is more significant that I expected. If you invest in on the day the load goes live, the return rises from 9.1% to 9.5%. Obvious when you think about it, but worth taking account of now these loans are taking more than a week to fill.

I've got a little table showing IRR returns before tax for 12 and 18mth loans, at various interest rates, at two levels of drawdown time (4 and 14 days) from the time of investment.  I use this to decide in the first place if its worth looking further at a loan. I agree with your results (well, 9.55 for the 18 mth example) but the number of decimal places one works to has a small effect on the results.  And what happens to all those millions of minute amounts that get chopped off if FC work to 2 decimal places?   If the interest payment should be £0.541667 per month on a £100 loan, what happens to the £(12 x .001667) multiplied by 4600 loan parts, or about £92 per loan?

As most of us pay tax, it would be useful to look at the post-tax returns, as per fasty (have no idea how to make this a link with a different colour!).  I'll do that sometime for a standard rate taxpayer for the 16 results I have.  At the moment, 12 mth loans at 8 per cent with 2 per cent cash back are the threshold below which I will definitely not go.   For 18mth loans the minimum interest rate is 9 per cent.