Landbay Suffers First Tardy Borrowers, Changes Lending Standards
Landbay*, which does mortgages for residential landlords, has had a perfect record since it started in 2014, with no peer-to-peer loans falling even one payment late.
As of this month, it now has three loans out of 733 – or 0.4% – that have each missed a payment and have therefore fallen just slightly late.
At this stage, this minor blip doesn't touch Landbay's +++ Rating, the top rating. It also still retains its Risk Score of 2/10, the lowest of all P2P lending sites. At this point in Landbay's life and in the current economy, its late loans are within expectations. (Read About The 4thWay PLUS Ratings and 4thWay Risk Scores.)
It was inevitable that Landbay, like all P2P lending sites, would eventually suffer some late loans. It will also suffer bad debts at some point too. No type of lending is immune to bad debts, even when it comes to safer forms of lending such as this.
In other news…
This was all announced quite a lot of weeks ago, but I've been waiting to find an article I can slot it into.
We were a bit saddened when Landbay increased its maximum loan a few years ago, allowing landlords to borrow up to 80% of their property's valuation. 80% is fine for a maximum for these kinds of loans. But obviously for lenders the previous maximum of 70% was better, since it offers more protection to lenders in the event the borrower can't repay and their property needs to be sold on your behalf.
So we are pleased to see that the maximum has now been reduced to 75%.
The average loan size (in contrast to the maximum loan size) has risen over the past few years from below 70% to be around 75%, which really is about as high as we would ever like to see it – any higher and it could impact Landbay's 4thWay PLUS Rating or Risk Score, increasing the odds of losses in a severe recession. So with the lower maximum we expect this average loan site to improve.
Landbay has also increased the maximum loan amount to £1.5 million, up from about £1 million previously. I don't think this will usually mean that you will lend more to the same borrower, which would have been a potential concern.
4thWay's experts also don't currently expect that these slightly larger loans are more likely to go bad or result in losses, although that is something that they will keep an eye on for you.
As a result of the change, the loans that Landbay will make available for both individual lenders and institutional lenders (e.g. banks and investments funds) will now be the same, which helps us to see that things are fair, and that institutions are not being favoured over the little guy or gal.
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The 4thWay® PLUS Ratings are calculations developed by professional risk modellers (someone who models risks for the banks), experienced investors and a debt specialist from one of the major consultancy firms. They measure the interest you earn against the risk of suffering losses from borrowers being unable to repay their loans in scenarios up to a serious recession and a major property crash. They assume you spread your money across hundreds or thousands of loans, and continue lending until all your loans are repaid. They assume you lend across 6-12 rated P2P lending accounts or IFISAs, and measure your overall performance across all of them, not against individual performances.
The PLUS Ratings are calculated using objective criteria that can be measured and improved on over time, although no rating system is perfect. Read more about the 4thWay® PLUS Ratings.
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