Landbay, a peer-to-peer platform for buy-to-let mortgages, recently commissioned The Wrigleworth Consultancy to conduct a thorough review of the buy-to-let industry. The findings suggest that peer-to-peer lenders have the potential to revolutionize the space. Buy-to-let in general, it was concluded, would survive a 2008-like recession due to the combination of rapid population growth and a comparatively weak home-building response.
The research also clarified the opportunity for peer-to-peer lenders. With average new mortgage rates currently a third more expensive for landlords than for owner-occupiers, the opportunity for P2P disruptors has ripened. What’s more, the report asserts that platforms such as Landbay possess a natural sturdiness and are capable of weathering even the most severe of economic shocks.
The stress testing of Landbay’s loan book emphasized the quality manual underwriting of the platform’s lending process – citing this as a key factor in the platform’s theoretical resilience. Greater attention to landlords’ personal finances supposedly renders the platform less prone to losses than traditional buy-to-let lending methods – which rely heavily on automated underwriting systems.
“The world has changed. Now everyone has access to the sorts of markets that were once the preserve of large financial institutions. A new energy for more inclusive finance, combined with new technology, is revolutionising the world of saving and borrowing. This has only just begun, and over the long-term the impact of these fundamental changes will be far greater than was at first envisioned.
“All peer-to-peer finance is relatively new – but it would be an enormous mistake to assume that means this broad swathe of lending is in any way uniform. Combining P2P lending with the backstop of income-producing property as security can create an entirely different class of investment – while shaking up competition in the world of mortgage lending.”