Landbay Review – My Lender Experiences After 3+ Years

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landbay

Landbay Peer To Peer Lending Review

** Landbay review updated November 19th, 2018 **

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 lower loan to values (70% LTV average) and rental coverages at a minimum of 125% of the mortgage payment. I continue to happily lend through Landbay.

My October 2018 Investment: Reduced
My annual rate of return: 3.97% (After fees but before taxes)
Est. Annual Returns:Up to 3.54%
Recent Return Rate Trend:
My Risk Rating *:
Launched:2014
Early Exit:
Autoinvest:
Provision Fund:
ISA Available:
Loan Types:Buy-to-let mortgages
Loan Security:Property
Lender Fees:None
Min Investment:Regular account: £100 to start, £10 after
ISA: £5,000 min
Avg. Lender Portfolio Size:£10,000
Time to Become Invested:Short, usually within 24 hours of receipt of cleared funds.
Time Needed Managing:
None
Lending Agreements With:Borrowers
FCA Regulation:Full
Cashback Offer:
£50 cashback when you lend £5,000 to Classic or ISA
Sign Up:Sign Up Now

* This opinion risk factors in loan types, interest returns, company history, default numbers, and my own investing experience. Risk rating explained here.

How Do I Sign Up?

Sign up for Landbay now and receive a £50 bonus when you invest £5,000 in the Classic account or in the ISA account. (This is a referral link. By signing up for your account through Financial Thing, you enable me to continue to write and update reviews so thanks in advance).

Landbay Review: What You Need To Know

Pros
  • 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
  • Zero defaults
  • Possible exit depending on demand (can take weeks to sell loans)
  • Very easy to use / set and forget with auto-reinvestment
  • Lending agreements directly with borrowers
Cons
  • Lower risk = lower return rates
  • Rates have been falling
  • Secondary market exit has become slower
  • No way to see what loans your money is invested in
  • Capital repayments aren’t automatically reinvested
  • All property, no sector diversification

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. Even if your money is in queue, you still receive interest in the form of cashback. Interest rate returns are on the lowest side of peer to peer lending, but 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 full loan book is very transparent and can be downloaded here. This information shows how much interest borrowers are paying on each loan and how many payments have been missed.

I used to be able to exit funds quickly but recently I’ve noticed exiting is much slower so if you think you’ll need access to your money, keep this in mind.

Read on for my exclusive Landbay review.

Equivalent Competitors

Ratesetter, Zopa, Lendinvest, Octopus Choice

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. Interest rates have dropped but this has been happening with many peer to peer lending platforms. Sometimes 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.

On October 2nd, 2018, I placed some of portfolio up for sale to test the resale market. I received a partial sell out of 67% of my loans on October 29th (day 27). The remaining 33% sold on November 19th, 2018 (day 48).

I visted Landbay’s offices in August 2018 and was impressed with their operations. All in all, I’ve had nothing but good experiences investing through Landbay.

When Did Landbay Launch?

April 2014

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 Financial Conduct Authority #719626 under full permissions granted December 22nd, 2016. Investments made through Landbay are not covered under the FSCS (Financial Services Compensation Scheme). FCA regulation is nothing like the FSCS, which covers consumers when they deposit money in banks. The FCA reports to the UK government and has the ability to pursue criminal action against companies which violate its standards and codes of conduct.

Is An Innovative Finance ISA Available?

Yes and the minimum investment is £5,000

How Much Annualised Interest Can Landbay Lenders Expect?

Tracker Rate: 3.14% (with reinvested repayments)
Three Year Fixed Rate: 3.54% (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 to date, Landbay’s defaults stand at 0.00%. This 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 statistics here.

What’s The Minimum Investment?

Regular Account: £100 to start then £10 additional investment
ISA: £5,000 minimum then £10 additional investment

What Are The Fees? 

There is a 0.2% exit fee on the Fixed Rate product. There may also be an additional fee if the interest rate on your loans is lower than the current rates. This is to prevent lenders’ selling loans at lower rates and reinvesting at the higher rates. There are no fees on selling Tracker Rate products. Landbay doesn’t charge any other 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 70%.

Is There A Secondary Market?

Sort of. The Tracker product offers an 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 five years providing there are funds available. There is a 0.2% exit fee on the Fixed Rate product plus if the interest rates have risen since you invested, there maybe be additional costs to cover the interest rate differences.

I placed some of my loan portfolio up for sale on October 2nd, 2018. It took 48 days for all of my loans to be sold.

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?

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 70%.

Landbay receives a large portion of its lent funds from financial institutions. Institutional money tends to indicate lower risk. tend to invest in lo

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

ISA

Landbay offers an ISA and the minimum investment is £5,000. Your money will start earning interest within 24 hours of receipt of cleared funds provided loans are available.

Zero Defaults

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 to a minimum.

Reserve Fund

Landbay has a reserve fund funded from borrower fees that is currently 0.6% of outstanding peer to peer loans. Reserve funds provide an extra layer of security to cover shortfalls in property default recoveries. Reserve funds have their supporters and detractors. You can read more about the negatives in my Thumbs Down Section.

Possible Exit

Providing there are funds from other investors to purchase your loans, you can exit from both products. Exit used to be instant but now takes longer.

I recently tested the exit placing a portion of my loan portfolio up for sale on October 2nd, 2018. 67% of my loans were sold on October 29th, 2018.

Payments

Interest payments are credited promptly on the last day of each month.

The Website

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:

landbay review

And the page where you select your investment product and amount:

landbay review

landbay review

Doesn’t get much easier.

THUMBS DOWN FOR LANDBAY:
Lower Risk = Lower Return Rates

Rates have been consistently falling from the 4.15% rate I was able to obtain when I began investing through Landbay. Landbay’s rates are now in the mid to low 3% range which is lower than all other 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 higher risk platforms such as MoneyThing or Funding Secure, 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 several hundred mortgages (including institutional) and while it states that investors funds are invested in “multiple mortgages”, the website doesn’t show how many or which loans your money is invested in. It would be nice if Landbay invested lenders’ money across all loans rather than a select amount and nicer if Landbay shows which loans your money was invested in.

Slower Exit Via The Secondary Market

When I began investing in Landbay, exiting an investing happened in a matter of minutes. As interest return rates have fallen, it’s taking more time for loans to sell on the secondary market. If rates continue to fall and you want to exit your investment, exiting your loans will probably be difficult due to lower investor demand. Remember that exiting is never guaranteed and is always based on supply and demand. Being locked into a low return rate with no exit possibility could be the biggest downside to Landbay

Reserve Fund

Landbay’s Reserve Fund is used to cover shortfalls in default recoveries. This means is Landbay sells a property and the amount recovered is less than the loan value, the Fund could be used to cover the shortfall. The Reserve Fund is discretionary meaning Landbay decides whether or not to use the fund.

Having a fund like this could be reducing lender returns because the provision fund money is stored rather than paid out to lenders in the form of increased returns. Finally, the reserve fund is only 0.6% of the total loan book equating to just over £1m on a loan book of £170m. This Fund could be easily wiped out by a few bad loans, especially considering Landbay has several £1 million+ single loans on its books.

Something that recently confused me was that the Reserve Fund was used to pay some of my monthly interest while zero properties are being shown as being in default. For those who have noticed similar occurrences, I reached out to Landbay who sent me a prompt explanation:

“We recently updated our Tracker Rate on the 1st of Oct, in line with the new LIBOR rate and therefore interest rates have gone up. The confusion took place because some of our borrowers have set up standing orders for their monthly repayments and because they haven’t updated the amount they were due to pay, some of them had partial repayments as they were missing £10-200 of their payment.

We considered this to be an isolated event and decided to cover the missing amounts of borrowers from the reserve fund such that all investors can receive their interest payments on time and at the right amount. The borrowers with partial repayments have already been informed about their repayment status and the majority have already covered the difference and updated their standing orders for future repayments. Please extend our apologies to your readers for the confusion created and please assure them that everything is going well at Landbay and there is nothing for them to worry about. Our loans are as strong as always!”

Capital Repayments Aren’t Automatically Reinvested

When a loan matures or is repaid early, the capital repayment portion is placed into your holding account. Funds in the holding account aren’t automatically reinvested and earn no interest. Thankfully Landbay sends out an email when this occurs but if you’re busy like me, you may forget to log in and set these funds to be invested. I would like to see Landbay offer an option where capital repayments can be automatically reinvested.

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.


My Strategy

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. I’ve recently tested the resale market and it took 48 days to sell my partial loan portfolio. Resale possibility is great but never guaranteed. Something to keep in mind if you think you may need early access to your funds.

Landbay Conclusion

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 and it receives institutional money investments because of the safety. Landbay is backed by an experienced management team and offers 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.

One of the biggest downsides of Landbay is that existing investments is never guaranteed and might take some time, especially if return rates and lender demand is low. 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 £5,000 in the Classic account or in the ISA account. (This is a referral link. 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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Disclaimers: I’m not paid by or employed by any of the companies I write about. In most cases, I have invested or continue to invest my own money in these companies. The sign-up links on this website are referral links. When you sign up for an account through my website, I receive a referral fee directly from the companies, at no cost to you. Your support enables me to continue to operate the Financial Thing website. You can read more about my referral links here.

** 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. **