Does Landbay’s £1 Billion Deal Affect You?
Landbay has just announced that a “major financial institution” will lend another £1 billion through it. Landbay has previously arranged over £300 million in loans, with most of that coming from regular lenders.
I asked Landbay* some of the key questions that our experts at 4thWay use when gathering information about institutional lending.
Here is the Q&A:
Q: What is the name of the institution?
A: Unfortunately, we cannot disclose the name of the major financial institution.
Q: Over what time period are you targeted/roughly expected to have lent the full billion by?
A: We would expect to deploy these funds over the next three-year period, and can renew the agreement subsequently with mutual agreement.
Q: Will the institution lend in loans with precisely the same characteristics and criteria as P2P lenders?
Q: Can you tell me anything about the interest rates the institution will be earning?
A: Institutional funders receive the interest rate for the individual loans and are charged servicing and performance fees by Landbay. I cannot disclose these fees for commercial reasons.
Q: When it comes to loans that meet the same criteria you use for P2P loans, how are the loans allocated to the institution or to P2P lenders?
A: Landbay has a carve out [for individual lenders] with all of our institutional funders enabling us to allocate loans to [individual lenders] whenever there are funds available for investment. As such the allocation is randomised based on demand.
Q: Does the institution get to review and turn down individual loans?
If a loan does not meet our criteria it is simply declined – there is no concept of selection or reallocation between [individual lenders] and institutional.
Q: Do you expect your lending criteria for P2P loans to change in any way as a result of the higher number of loans you will be approving?
Landbay’s lending criteria for both P2P and institutional loans will continue to evolve but not specifically related to the higher volumes that we will see from this funding. We are in a growing segment of the market…Landbay has maintained default rates of 0%, showing our commitment to lending quality during a time of scale and we are focused on maintaining this track record.
The bottom line?
It looks like there's no cherry picking the best loans for institutions, since they get loans allocated like anyone else.
The scale of lending can impact quality, but £1 billion over about three years is little compared to the overall market for these loans. I think this lending will be of no impact to individual lenders, except perhaps to offer a little reassurance that a “major” institution is trusting Landbay.
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