Peer-to-peer lenders move into homebuyer market
THE GOVERNMENT has been increasing its support for homebuyers and now peer-to-peer platforms are adding themselves to the solutions.
Several firms are coming on to the market that enable retail investors to finance mortgage deposits. JustLend is in the process of launching BankOf, a P2P platform that funds borrowers’ mortgage deposits, stamp duty costs or even solicitor’s fees.
It follows Property Pact, a similar proposition which was set up last September by former mortgage broker and developer Errol Woodhouse. Property Pact investors can fund from £5,000 to £25,000 into each loan and receive an annual rate of five per cent over the Bank of England base rate quarterly.
But Woodhouse said finding the right type of borrowers was taking a bit longer than expected. “At first borrowers didn’t understand what we were offering and many applicants didn’t have good credit histories,” he explained. “Instead we opted for a Facebook campaign in December and got 47 pre-registrations who we now have to meet with.
“I don’t suppose all will meet our criteria as there will be a lot of boxes to tick before they get on the platform.
“We want to ensure we have the right type of borrowers for our interested lenders before going live.”
P2P lenders have traditionally steered clear of residential mortgages as their long terms are not typically suited to retail investors looking for greater liquidity. However, deposits and stamp duty offer a different way to tap into the homebuyer market.
“P2P mortgage lending increases the choice of mortgages for homebuyers and adds another investment option for investors,” said Neil Faulkner, managing director of research firm 4th Way.
“However, more financing options can’t correct a real imbalance between housing supply and demand, as was neatly demonstrated by the increasingly slack regulation of the mortgage market from the 1980s through to the financial crisis, where homebuilding still did not pick up enough to bring the housing market into balance.”
This article featured in the February print edition of Peer2Peer Finance News. Read the magazine online here.