Landbay Peer To Peer Lending Review
** Landbay review updated December 22nd 2016**
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’ve been lending for 15 months now and I’m happy. Read on for more..
My December 2016 Allocation: Unchanged
My annual rate of return: 3.77% (After fees but before taxes)
Landbay Review: The Low Down
- Safer peer to peer lending option
- Loans secured by buy-to-let property owned by experienced landlords
- 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
- Super easy to use / set and forget with auto reinvestment
- Lower risk = lower return rates
- Rates falling due to interest rate cuts
- All property, no sector diversification
- Demand higher than supply causing money to queue
- Cannot manually withdraw money in the queue
- Deposits take 2-3 days
I like Landbay. There’s no complicated bidding systems so 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 lower side of peer to peer lending, ranging from 3.43% to 3.75% (December 2017) but with peer to peer lending, you have to factor safety into the equation. I view Landbay to be safe so therefore I’m willing to accept lower returns. Coupled with the fact you can access your money should you need to, Landbay is a winner! Read more below 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 that there isn’t much to report. 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 slightly 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 sometime meaning demand is higher than supply. Interest is still paid on these queued funds so it’s not too much of a concern. All good experiences so far.
Landbay At A Glance
Landbay offers investors Buy-to-Let loans secured by tenanted property owned by experienced landlords. The loan book is very transparent and can be downloaded here. The website is very easy to use as it offers just two products:
- Tracker Rate which pays 3% above LIBOR and your money is instantly accessible if your loan pieces can be sold to other investors. The Tracker Rate is currently 3.43% (Dec 2016). Also if interest rates rise, then so will your returns.
- Three year Fixed Rate which pays 3.75% if you reinvest interest payments.
When Did Landbay Launch?
How Do I Sign Up?
Register Here (this is an referral link for which we will both be rewarded with £50).
What’s The Signup Process Like?
Relatively simple including the usual identification checks.
Who Can Open An Account?
Anyone who can pass their i.d. checks. This varies country by country.
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?
Not yet but once Landbay becomes a full member of the Financial Conduct Authority, it will be able to offer the new IFISA. I predict this should happen sometime before 2017.
How Much Interest Return Does Landbay Pay Lenders?
3.43% to 3.75% (Dec 2016)
Does Interest Accrue Immediately?
Yes, even if your funds aren’t allocated to loans, you receive interest as soon as you hit the invest button.
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 is 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?
£100 to start then £10 additional
What Are The Fees?
No fees to lenders
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 is for three years.
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. Landbay states that it may be possible to exit Fixed Rate investments before the end of the three years providing there are funds available. If the interest rates are higher, you may have to cover the difference.
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. I’m sure we will find out one day.
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, the property against could be worth less at re-sale.
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 colors. You can read it here.
THUMBS UP FOR LANDBAY:
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 is does sometimes lend to first time buyers subject to rental coverage being 135% and the landlord have a strong local area knowledge of where they are buying. Landlord must have a minimum income of £30,000.
Property must be located in England or Wales in areas with strong rental demand. Each property receives a RCIS Chartered Surveyors valuation.
Mortgage 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 not. This is important since Landbay has recently experienced a slowdown in borrower loans and demand appears to be greater than supply.
Low Default Rates
Default rates are currently at 0.0%. Landbay offer 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 money has to come from somewhere.
Possible Easy Exit
Providing there are funds from other investors to purchase your loans, you can exit instantly from the Tracker product. Many investors use Landbay as a short term easy access account. One thing to note is if your funds are queued you can’t withdraw them. I quick email or chat with customer support should allow you to withdraw.
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:
And the page where you select your investment product and amount:
Doesn’t get much easier.
THUMBS DOWN FOR LANDBAY:
Currently the highest rate investors can earn is 3.73%. This is lower than most peer to peer websites 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 this, if you invested in short term loans on platforms such as Money Thing or Saving Stream, you would only need to invest approximately £580 at 12% interest to make the same as you would on Landbay investing £2000. Something to consider.
Currently Landbay’s loan book contains more than 243 mortgages (including institutional) and while is states that investors funds are invested across “multiple mortgages”, the website doesn’t show how many your money is really invested in. Compare this to Wellesley & Co. which automatically diversifies investors money into all of it’s loans. This loans some questions about levels of diversification investors can expect.
Deposits are made via debit cards and take 3 business days to be processed. This is somewhat slower than other peer to peer lending sites.
Landbay is a set and forget investment platform so 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 but I will probably switch to the fixed rate in future. 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 sites, 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 could be your answer.
If you enjoyed my Saving Stream 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.
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.