Peer-to-peer lender Landbay is to publicly share more data about its loans, in an attempt to “set new standards of openness”.
Landbay allows people to lend money to professional buy-to-let investors. And it is now going to publish additional information, such as the type of property being lent against, the loan-to-value, rental expectations, location, the interest rate paid by the borrower and the interest rate paid to the lender.
John Goodall, co-founder and CEO of the firm, said that anybody lending through a peer-to-peer platform is taking some risk, and should be properly compensated for that risk. By publishing borrower and lender rates for every loan, he believes lenders will be able to establish whether they are being appropriately rewarded.
He added: “Ideally all peer-to-peer lenders will adopt this new standard of openness as a great way to show everyone that this exciting new sector has nothing to hide.”
Lend through Landbay and earn up to 4.4%
How does Landbay work?
Landbay uses the money from lenders to provide landlords with finance for buy-to-let properties. Mortgages are available on either a fixed rate or tracker rate basis, always over five years. The fixed rate sits at 4.2% for three years, and then moves to the tracker rate for the next two years. The tracker rate follows Bank of England Base Rate plus 3%, so is currently 3.5%.
[SPOTLIGHT]The loans are interest-only, with the remaining sum paid off at expiry.
Each loan is made up of lots of small loans from different, individual lenders. After you register with Landbay, you upload your funds and choose whether you want to lend via the fixed or tracker rate mortgage. Your money is then matched against a “diversified portfolio of tenanted residential homes”.
There is a secondary market which allows you to sell on your loan parts if you so wish, so long as Landbay can reallocate those loan parts to new lenders.
How does Landbay make its money?
Borrowers are charged application and product fees up front of 2%-2.25%. It also takes a margin on the loan throughout the term, typically 0.5%-1% of the total outstanding.
Essentially, if you’re a lender, you don’t have to pay Landbay anything – you’ll get 4.4% on the fixed rate (based on re-lending the returns each month, otherwise it will be 4.2%) or Base Rate plus 3% with the tracker.
How safe is my money?
As Goodall points out, with any peer-to-peer loan there is some risk involved.
However, loans are secured against the properties in the form of first-mortgages, and Landbay emphasises that it is very stringent in who it decides to lend to, arguing that its default rates are historically lower than any other form of peer-to-peer loan. It also lends your money across a range of properties across the country, to spread the risk.
Just remember that while Landbay is regulated and authorised by the Financial Conduct Authority, it’s not covered by the Financial Services Compensation Scheme, which protects deposits with traditional banks and building societies.
Lend through Landbay and earn up to 4.4%