How P2P for Property can Enhance the Market: Insights from Ian Thomas, LendInvest
A few weeks ago, the AFN caught up with Ian Thomas, Co-founder of LendInvest to learn about their model and how property based lending via P2P can enhance the marketplace for borrowers and lenders alike. Be sure to check out the LendInvest Case-study video in July!
Here is what he had to say:
P2P lending will provide a catalyst for change in the mortgage market, P2P lender’s use of technology and big data will enable better risk underwriting and will provide borrowers with a straight forward and transparent application process. The length of time it takes to obtain a mortgage from traditional lenders and the lack of real risk adjusted pricing in the available products means the market is open to being disrupted. P2P lenders are not weighed down by a lot of the historic, costly and outdate practices and business models of old world banking, and can in time provide a far more appealing and cost effective alternative to the incumbent lenders.
Unlike other P2P models, property provides a secure tangible asset with a reliable and predictable value. Although the property market is cyclical and prices rise and fall, the fundamentals of property are strong and it does not suffer the same obsolescence risks as lending against factory machinery and business stock. At Lendinvest, we have significant experience of property lending and have very robust systems to mitigate risk, we undertake many hundreds of checks on borrowers and combine a multitude of data sources to derive an accurate picture of a borrower’s circumstance and ability to service a loan.
At Lendinvest, we currently only provide unregulated mortgage loans, which means we do not lend to a borrower who is currently or will be in the future living in the property we are lending against. There is greater regulation around owner occupied residential mortgages and the recovery process for a regulated mortgage is far slower than that of an unregulated buy to let loan. Our current investors on the platform understand this and prefer to lend against buy to let and commercial properties. Having said that entering the regulated mortgage market is something we would not rule out in the future.
The composition of investors/lenders on P2P platforms is evolving rapidly with increased interest from banking and institutional players. This was seen recently with Funding Circle’s tie up with Santander and the recent launch of the £200m Marshall Wace P2P fund. As these new players enter the market the cost of funding will reduce and this will widen the scope of competitive lending products which are offered through P2P platforms, expanding the impact of P2P on mainstream lending.
An exciting new evolution of the P2P market is the inclusion of P2P within New ISAs (NISA). The ISA market is huge in the UK, currently worth over £400bn, with NISAs and reform to pension annuities this is likely to grow substantially in the coming years. This will provide a further catalyst to expansion of the market. Property as an asset class and P2P lenders which focus on property lending such as Lendinvest are set to be popular with NISA holders who are looking for secure and reliable returns from an experienced property lender.
The future is bright for marketplace lending models such as Lendinvest, and there is a real opportunity to disrupt the mortgage market and provide a better way for borrowers to obtain a mortgage.
Lendinvest is an online marketplace for mortgages, allowing investors to invest in P2P loans.
AuthorIan Thomas, Co-Founder LendInvest