Landbay Peer To Peer Lending Review
** Landbay review updated August 15th 2017 **
Landbay is a peer to peer lending site developed around simplicity, safety and ease of use. Investors money is lent to experienced Buy to Let landlords whose tenanted houses have low loan to values (67% LTV average) and rental coverages at a minimum of 125% of the mortgage payment. I continue to happily lend through Landbay.
My August 2017 Allocation: Unchanged
My annual rate of return: 3.63% (After fees but before taxes)
|Est. Annual Returns:||Up to 3.75%
|My Risk Rating *:|
|Loan Types:||Buy-to-let mortgages|
|Min Investment:||Regular account: £100 to start, £10 after
ISA: £5,000 min
|Avg. Lender Portfolio Size:||£10,000|
|Time to Become Invested:||Within 24 hours of receipt of cleared funds, subject to mortgage investments being available.|
|Time Needed Managing:||Low|
|Lending Agreements With:||Borrowers|
|Cashback Offer:||£50 cashback when you lend £1,000|
* This opinion risk factors in loan types, interest returns, company history, default numbers and my own investing experience. Risk rating explained here.
Landbay Review: What You Need To Know
- Safer peer to peer lending option
- Loans secured by buy-to-let property owned by experienced landlords
- ISA available
- Interest accrues instantly upon investment, even if your money is in the queue
- Low default rates (2014-2016 currently 0%)
- Possible exit depending on demand
- Very easy to use / set and forget with auto-reinvestment
- Lending agreements directly with borrowers
- Lower risk = lower return rates
- Rates are falling
- All property, no sector diversification
- Deposits take 2-3 days
I like Landbay. There’s no complicated bidding systems or convoluted website. Just deposit money, choose between two lending options and you’re done. Providing there are loans available, your money is invested quickly and you start earning interest immediately. Interest rate returns are on the lowest side of peer to peer lending, but with peer to peer lending, you have to factor safety into the equation. I view Landbay to be a safer option so I’m willing to accept lower returns as part of my diversified portfolio. Landbay’s loan book is very transparent and can be downloaded here. Coupled with the fact you can access your money should you need to under normal market conditions, Landbay is a winner! Read on for my exclusive review.
Landbay: My experiences so far….
I have been investing in Landbay loans since September 2015. It’s such an easy set and forget website. I deposited money, chose the Tracker product which offers instant access to funds, selected interest reinvestment and received monthly interest payments. Recently, interest rates have dropped but this has been happening with many peer to peer lending platforms. I’ve noticed that my funds have remained in the queue for quite some time meaning demand is higher than supply but interest is still paid on these queued funds in the form of cashback so it’s not a concern.
In June 2017, I reduced my Landbay position slightly in order to invest in Growth Street. I still love Landbay but my resources are limited so sometimes I need to do a bit of fund shuffling.
All in all, I’ve had nothing but good experiences investing through Landbay.
When Did Landbay Launch?
How Do I Sign Up?
Register Here (this is a referral link for which you will receive £50 cashback when you invest £1,000. By signing up for your account through Financial Thing, you enable me to continue to write and update reviews).
What’s The Signup Process Like?
Relatively simple including the usual identification checks.
Who Can Open An Account?
You must be 18 years or older and be a resident of the UK with a UK bank account. Landbay makes new applicants pass the verification checks.
Are They Regulated?
Yes, by the UK Government’s Financial Conduct Authority full permissions. FCA regulation is nothing like the FSCS (Financial Services Compensation Scheme) which covers consumers from bank failures. The FCA does have the ability to pursue criminal action against companies it finds are in violation of its standards, but it’s not a government entity and it’s funded by the very companies it regulates.
Is An Innovative Finance ISA Available?
Yes. Landbay is now fully authorised by the FCA and offers an ISA. The minimum investment is £5,000 and the expected annualised return is 3.75%. High demand may cause the ISA to be closed from time to time.
How Much Interest Return Does Landbay Pay Lenders?
Tracker Rate: 3.34% (with reinvested repayments)
Three Year Fixed Rate: 3.75% (with reinvested repayments)
Does Interest Accrue Immediately?
Interest accrues within 24 hours of deposit receipt providing loans are available. Even if your money is sitting in the queue, interest accrues but is paid in the form of monthly cashback.
What are the Loan Default Rates?
From 2014-2016, Landbay’s defaults stand at 0.00%. Wow! But it really isn’t too surprising since their lending criteria are some of the strictest in the peer to peer lending space. Landbay’s expected default rate is only 0.10%. You can see current loan book statistics here.
What’s The Minimum Investment?
Regular Account: £100 to start then £10 additional
ISA: £5,000 minimum than £10 additional
What Are The Fees?
Possible 0.2% exit fee on the Fixed Rate product if interest rates have risen since you invested. This is to prevent lenders’ selling loans at lower rates and reinvesting at the higher rates. If rates have fallen, the exit will be fee free. Other than that, no fees.
How Long Are The Investment Terms?
The Tracker Rate product doesn’t have a term and offers instant access subject to more funds being available from other investors to purchase your existing loan pieces.
The Fixed Rate product invests in loans which are two, three and five years. When a borrowers mortgage loan moves into a variable rate, so does your investment. This means your money could be fixed for up to five years, depending on the terms the borrower has agreed to.
What Security Does Landbay Use?
Tenanted houses and flats secure all loans. Loan-to-values average 67%.
Is There A Secondary Market?
Sort of. The Tracker product offers instant exit provided there are funds available from other investors to purchase your loans. I requested to sell some of my loans recently and my funds were available in seconds.
Landbay states that it may be possible to exit Fixed Rate investments before the end of the five years providing there are funds available. If the interest rates are higher, you may have to cover the difference in the form of an exit fee.
What Are The Main Risks?
Platform failure: If Landbay fails, provisions are in place for investors loans to be administered by a third party. Of course platform failure is a disastrous outcome with many unknowns. This is the risk of peer to peer lending.
Borrower default: If the borrower stops paying then Landbay must step in, recover the property and place it for sale to recover funds for investors. Since Landbay hasn’t experienced any defaults, we have no idea how effective their recovery process is. In 2013, the buy-to-let mortgage default rate was a minuscule 1 property in 1,000 so lending against BTL mortgages is a pretty safe bet.
Economic downturn: In the event of a property crash, values may fall and defaults may rise. This could result in Landbay recovering less than the mortgage balance and in turn, investors losing money. I think this is unlikely since most loans have low loan to values and historically, UK property prices have remained strong.
Valuation mistakes: Much reliance is placed on accurate property valuations. If a mistake is made and the loan borrower defaults, the property could be worth less when resold. Landbay’s team seems like they are competent at obtaining and evaluating valuations.
Is There A Provision Fund?
Yes. It is currently 0.6% of the total outstanding loans.
Am I Lending To Landbay The Platform Or To Borrowers?
What Happens If Landbay Goes Bust?
Any unused funds are held in separately protected RBS and Barclays bank accounts. All loans are between lenders and borrowers and the event of failure, Landbay’s third party loan administration provider would manage all loans to ensure repayment. Incidentally, Landbay hired an independent company to perform a stress test to see how they would fare during a severe property downturn. The report showed Landbay would survive with flying colours. You can read it here. I believe stress tests should be taken lightly but it’s still a nice read.
THUMBS UP FOR LANDBAY:
Safety / Loans Secured By Property Owned By Experienced Landlords
Landbay has focused their business model on reducing investors risk to a minimum. They do this in several ways:
High-quality loan underwriting and stringent application criteria. Landlords must have no adverse credit events within the last 3 years, usually not be first time buyers and already own residential property, have a minimum of 125% rental coverage, meaning £125 of rent brought in on every £100 owed on mortgage (current average is 165%). Landbay states it does sometimes lend to first-time buyers subject to the rental coverage being 135% and the landlord having a strong local area knowledge. The landlord must have a minimum income of £30,000.
The property must be located in England or Wales in areas with strong rental demand. Each property receives an RCIS Chartered Surveyors valuation.
Mortgages must be less than 80% of the property’s value. Currently, the average is 67%.
Instant Lender Returns
Lenders interest accumulates upon investment whether money is allocated to loans or sitting in the queue. This is important since Landbay sometimes experiences a slowdown in borrower loans and lending demand can be greater than loan supply. All queued funds receive monthly “cashback” rather than interest since the funds aren’t lent against loans
Landbay now offers an ISA. The minimum investment is £5,000 and the expected annualised return is 3.75%. Your money will start earning interest within 24 hours of receipt of cleared funds provided loans are available.
Low Default Rates
Default rates are currently at 0.0%. Landbay offers landlords fixed rate mortgages up to 10 years at very reasonable interest rates (4-5.5%). Unlike other peer to peer lenders offering high-interest rate loans, sometimes up to 20%, Landbay’s low-interest rates should keep defaults low.
Landbay has a reserve fund that is currently 0.6% of outstanding peer to peer loans. Reserve funds provide an extra layer of security to cover missed mortgage interest payment. Two negatives here. Firstly reserve funds are almost always discretionary which means the powers that be at Landbay decide whether to use the fund. Secondly, this fund is likely reducing lenders returns because the provision fund money is stored rather than paid out to lenders in the form of increased returns.
Possible Easy Exit
Providing there are funds from other investors to purchase your loans, you can exit instantly from both products. I was able to do so in seconds. Many investors use Landbay as a short term easy access account.
Interest payments are credited promptly on the last day of each month.
Landbay made one of the easiest websites to use in peer to peer lending. Here is the Portfolio dashboard that shows you how much of your money is invested and how much is in the queue:
And the page where you select your investment product and amount:
Doesn’t get much easier.
THUMBS DOWN FOR LANDBAY:
Lower Risk = Lower Return Rates
Currently, the highest rate investors’ can earn is 3.75%. This is lower than most peer to peer companies but better than savings accounts. In fairness, you do have to factor in safety and I consider Landbay to be a fairly safe place to park your money. Having said that, if you invested in short term loans on platforms such as Money Thing or Lendy, you would only need to invest approximately £580 for a year at 12% interest to make the same as you would on Landbay investing £2000. Something to consider.
No Information To Show Which Loans Your Money Is Invested Into
Currently, Landbay’s loan book contains more than 273 mortgages (including institutional) and while it states that investors funds are invested in “multiple mortgages”, the website doesn’t show how many loans your money is really invested in. It would be nice if Landbay invested lenders’ money across all loans rather than a select amount.
All Property, No Sector Diversification
Other peer to peer companies offer various sector loans allowing lenders to diversify their portfolios. One negative about having an entire property loan book is that if the property market crashes, Landbay’s loan book could suffer.
Deposits are made via debit cards and take up to three business days to be processed. This is somewhat slower than other peer to peer lending sites and for me is a minor annoyance since we live in a world of instant gratification.
Landbay is a set-and-forget investment platform so there’s no real strategy here. The only decisions to make are whether you want the easy access Tracker Rate or the Fixed Rate, and whether or not you want to reinvest interest. I chose the Tracker Rate with reinvestment for easy access. Despite a drop in interest rates, I continue to leave money in Landbay as I consider it a part of my overall diversification.
It’s hard to fault Landbay’s business model and strict underwriting criteria. I consider it to be one the safer peer to peer platforms. Landbay is backed by an experienced management team and offer landlords low fixed interest rate loans for up to 10 years. The investor returns are lower than some peer to peer companies, but this is offset by lowered risk. For those who want a set-and-forget investment method that pays higher interest than the banks, Landbay is a worthy choice.
Sign up for Landbay now and receive a £50 bonus when you invest £1,000 (this is a referral link for which you will receive £50 cashback when you invest £1,000. By signing up for your account through Financial Thing, you enable me to continue to write and update reviews so thanks in advance).
If you enjoyed my Landbay review and want to learn more about peer to peer lending, click here and receive my complimentary Top 5 Peer to Peer Lending Sites Report.
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** This unbiased Landbay review is for information purposes only and should not be regarded as investment advice. Opinions expressed are current opinions and based from my own personal experiences. Peer to peer lending contains risk so never invest more than you can afford to lose. **