Landbay is a peer to peer lending platform which specialises in Buy to Let mortgages. I’ve reviewed them in detail here, and produced an interactive data visualisation on their loan-book data last December.
Compared to other P2P lending sites, Landbay’s returns are lower: 3.43%-3.75%. The borrowers themselves only pay between 3.88% and 4.65%. This is due to the type of loans they offer: long term loans secured against BTL property. Loans are at a max Loan to Value of 80% with at least 25% margin of safety between the interest payments and rental income. On top of this, Landbay have additional provisions which allow them to step in and become a receiver of rent if necessary, and maintain a provision fund.
So in terms of the loans themselves, at least for a non-FSCS protected P2P lending site, it sounds quite safe.
I’ve had a few people contact me via the contact email for this blog. Their shared concern was that Landbay’s loan origination was too low, and that although the loans may be relatively safe, there was a higher platform risk with how they saw things were going. This post aims to understand these concerns and then try to find out what’s really happening at Landbay.
As soon as you assign your money to an investment at Landbay, you start to earn interest. This is even before Landbay have assigned it to a mortgage. In these cases Landbay are covering the interest payments out of their own pocket.
Back in October 2016, Business Insider wrote a pretty negative article about Landbay. The article claimed that Landbay’s lending volumes “collapsed by 95% in just three months” amidst “wider jitters for Britain’s emerging PropTech companies”.
I’ve noticed in my own account that my latest investments have been sat in the queue for a long time. If you look at some of the data in the run up to Business Insider’s article, you can see the dip in lending:
Landbay were one of the first major lending platforms to offer a functioning Innovative Finance ISA product. They have a partnership with Zoopla, one of the largest UK property websites, which introduces the brand to a wider retail investor market. So, on the investor demand side they have huge opportunities to grow and attract new investments.
What are Landbay doing?
I spoke with Landbay to get their opinion and an idea of some of the things they are doing to increase loan origination.
Firstly, they explained that the situation was not directly comparable to other peer to peer lending sites. Consumer lending for example is much quicker than Buy-to-Let mortgages. On the origination of new loans, they are making lots of the right moves:
- They’ve cut their mortgage rates (and reduced the corresponding amount for lenders)
- In January 2017 they launched an intermediary website (intermediaries.landbay.co.uk) that makes the application process easier for mortgage brokers. Apparently, before this site was launched brokers had to fill out an application form. The new website makes it easy to understand the products offered by Landbay. I imagine that BTL landlords and not just brokers would find this really useful.
- They are hiring people who have experience in working with mortgage intermediaries.
So has this had an impact yet? I looked into the loan book data that Landbay publish on a regular basis. This contains details on every new loan they make. Since the end of January they’ve made 3 loans, which is roughly in line with the start they had in 2016 but lower than 2015. As the BTL process can be slow, it’s too early to tell just yet how effective Landbay’s strategy will be to increase loan origination.