Landbay is a peer to peer lending platform where investors can purchase small portions of the buy-to-let property mortgages. And all the Landbay loans are secured by a property. This makes Landbay different from the other p2p platforms where usually the loans are unsecured. This specialist platform has some benefits over the typical p2p lending, but it also has a few risks. However, just like every investment your capital is going to be at risk when investing in Landbay.
How does Landbay work?
Landbay was founded in the year 2013. It is a buy-to-let property mortgage platform and since the average loan is for £235,640 it just can’t match the investors with the borrowers. Whenever the landlords get their first loan the funds come either from a retail investor or an institutional investor and it remains this way during the term period of the mortgage.
Whenever an individual invests in Landbay, their money is spread across multiple mortgages and they are repaid gradually. And when a tenant makes the monthly rental payments, the buy to let owner makes an interest rate on the monthly mortgage payment, which is then split between each lender who is invested in the loan.
What’s the Signup Process Like?
Quite simply just includes the usual identification checks.
Requirements for opening an Account?
You have to be 18 years or older, be a resident of the UK and have a UK bank account. The platform makes all new applicants pass the verification checks.
What’s the Minimum Investment?
ISA: £5,000 minimum then £10 added investment
Regular Account: £100 to start then £10 added investment
What are the rates on offer?
The return for the investors in the fixed rate loans is 3.54% and 3.25% for tracker rate loans.
How Much Annualised Interest Can Landbay Lenders Expect?
3-Year Fixed Rate: 3.49% (with reinvested repayments)
Tracker Rate: 3.15% (with reinvested repayments)
Default Rates of the Loan
From its establishment since 2014 till date, the company’s defaults stand at 0.00%. this is not too surprising as their lending criteria are very strict in the peer to peer industry. The platform’s expected default is just 0.10%.
Does Interest Accrue Immediately?
The interest grows within 24 hours of the deposit receipt if the loans are available. Even if your cash is sitting in a queue, the interest grows but is paid in the form of monthly cashback.
What Are the Fees?
There is an exit fee of 0.2% on the fixed rate product. There might also be an additional charge if the interest rate on your loan is less than the current rate. This is to prevent the lenders’ from selling loans at lower interest rates and reinvesting at a higher interest rate. There is no fee on selling the tracker rate products. Other than that, Landbay doesn’t charge any fee.
Is an Innovative Finance ISA Available?
Yes, and the minimum investment has to be £5,000
Who does Landbay lend to?
So far Landbay has lent over £244 million, over 1083 mortgages which were backed by the properties worth over £348 million.
Pros and Cons of Landbay
- Safer p2p lending option
- ISA available
- Interest grows rapidly upon investment, even if your cash is in the queue
- Loans are secured by buy-to-let property owned by the experienced landlords
- Zero defaults
- Probable exit depending on demand
- Very easy to use/set and auto-reinvest
- You can select to reinvest money, interest or both
- Direct Lending agreements with borrowers
- Rates have been falling
- Lower risk = lower return rates
- No way to see what loans your money is invested in
- Secondary market exit has become slower
- All property, no sector diversification
What product is available to p2p investors?
You can choose between the classic account and the new innovative Finance ISA (IFISA). Both investment options will give you a choice between a tracker product with an expected interest return of 3.15% and a fixed rate deal of up to 5 years with an expected interest return of 3.54%. both products pay interest each month, you can withdraw the money and reinvest it.
Also, the landlords can make funds repayments every year and the investors share are put in their Landbay account. You can either withdraw the interest or reinvest it. If an investor wants to withdraw their money before the end of term period of the mortgage, then Landbay will sell the loan on, if there is any available buyer. Further, there is no fee for the investors, except a £50 ISA transfer-out fee, but, you need to invest no less than £5,000.
What kind of protection is in place?
With this type of investment protection from the UK government is non-existent, hence it is important that you give attention to every individual business’s protection policies. Landbay’s underwriting states that every loan is the initial step since it is designed to recognize the landlords can be a potential threat. As with all the p2p companies, the capital of investor is spread over several loans, thus if one borrower’s loan defaults they wouldn’t lose everything.
Furthermore, the loans at Landbay are backed by properties, in the event the borrowers’ default, this would mean that Landbay can sell their property to get some of their investment back at least. Landbay also ensures that it is not overexposed to any type of loan. The average loan to value is 71.99% currently and the average rental revenue to debt service coverage is on average 190.2%. this ensures that the company can handle a few variations in their conditions without defaulting and that in the worst scenario, Landbay will be forced to reclaim a property during a decline, they have some kind of protection against the house fee drops.
also, Landbay runs a minor Reserve Fund which gets funded by a proportion of the charges and margin. In case a borrower defaults then the reserve fund, which is equal to 0.6% of unsettled loans would be used to make up for the shortfall of lenders. Also, if Landbay re-claims a property and there is any shortfall then the difference can be made up by the reserve fund.
Up to now, there have been no defaults, which is a testimony to the underwriting is, however it means that the protection levels haven’t been tested.
Are They Regulated?
Yes, Landbay is regulated by the Financial Conduct Authority under full permissions granted in 22nd December 2016. The investment made through Landbay is not covered under the Financial Services Compensation Scheme (FSCS).
The FCS regulation is nothing like the FSCS which covers customers when they deposit cash in banks. The FCA reports to the UK government and can pursue criminal actions against businesses which violate its standards and codes of conduct.
Remember that there is no guarantee and it the market suffers then there will be serious price defaults and drops, there is always a risk that the capital would end. Overall, Landbay isn’t covered by the FSCS like a savings account is. So, in case the company went broken, there would not be similar protection in place.
It is difficult to fault the business model and strict underwriting criteria of Landbay. It is one of the safe p2p platforms and it gets institutional money investments because of the safety. The company is backed by an experienced team and provides a landlord with low fixed interest rate loans for up to 10 years.
Read my 100% unbiased Landbay review here. Based on my own investing experience