Banks are increasing their mortgage risk, P2P lender Lendy says

By Moriah Costa on 11th September 2017

P2P/Marketplace Lending

Banks are increasing the number of risky residential mortgages they are lending, bringing back memories of the financial crisis.

Banks are increasing their mortgage risk, P2P lender Lendy says

 

Banks are increasing the number of risky residential mortgages they are lending, bringing back memories of the financial crisis.

 

 

Have banks learned from the credit crunch during the financial crisis of 2008? Property-backed P2P lender Lendy doesn’t think so.

 

Citing data from the Bank of England, Lendy says banks are increasing the amount of riskier loans on their books, with the percentage of mortgages written at 90 per cent loan to value (LTV) increasing.

 

In the first quarter of 2017, 4.5 per cent of residential mortgages were written at 90 per cent LTV or more compared with 3.4 per cent a year earlier, and just 1.5 per cent in the fourth quarter of 2009, at the height of the recession, the P2P lender says.

 

The firm claims that at the pre-crunch peak in the second quarter of 2007, more than 16 per cent of mortgages were written at 90 per cent LTV or above.

 

“Banks may be drifting back towards more risk taking in the mortgage market,” said Liam Brooke, co-founder of Lendy. “Lending at 90 per cent or more LTVs lets them grow their loan books quickly, but it does raise the question of whether they have learned the lessons of the credit crunch.”

 

Lendy has a cap of 70 per cent LTV, with most of the loans held against property available on the platform are on average 60 per cent LTV.

 

“Concentration risk is a real concern for property investors, and diversifying away from an equity-only portfolio can help spread the risk in a way that direct investment cannot,” Brooke said.

 

Founded in 2012, Lendy is a P2P firm that makes out loans secured by property. The site has nearly 17,000 users and says investors have received a gross annual return of up to 12 per cent before tax, making a total of £28m in interest.

 

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