Will peer-to-peer finance make mortgage lending more accessible?

The analysis found that the phenomenon of buy-to-let would survive a new recession on a scale of the 2008 crash if helped by a growth in population and a weak home-building response.

Despite this however, the research also revealed the higher price of BTL finance, with the average new mortgage rates one third more expensive for landlords than for owner-occupiers.

This leaves a gap for P2P mortgage lenders to disrupt the industry. In the first-ever published stress tests for a peer-to-peer lender, the report also reveals that secured peer-to-peer lending against buy-to-let properties has a natural stability against economic shocks. This contrasts with severe uncertainty over other types of riskier peer-to-peer finance, such as unsecured personal loans to consumers, business credit, or other forms of direct peer-to-peer property ownership and development finance.

Stress tests of Landbay’s loan book also indicate the importance of quality manual underwriting when lending to landlords. More attention to landlords’ personal finances makes loan books less prone to losses than historic examples of mass buy-to-let lending using automated underwriting systems to approve loans.

John Goodall, cofounder and CEO of Landbay comments: “The world has changed. Now everyone has access to the sorts of markets that were once the preserve of large financial institutions. A new energy for more inclusive finance, combined with new technology, is revolutionising the world of saving and borrowing. This has only just begun, and over the long-term the impact of these fundamental changes will be far greater than was at first envisioned.

All peer-to-peer finance is relatively new – but it would be an enormous mistake to assume that means this broad swathe of lending is in any way uniform. Combining P2P lending with the backstop of income-producing property as security can create an entirely different class of investment – while shaking up competition in the world of mortgage lending.”