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Landbay Survives Severe Property Crash Stress Test
Landbay* is the first peer-to-peer provider to focus exclusively on mortgages to the buy-to-let sector.
In a recent report entitled “Democratising Mortgage Lending”, commissioned by Landbay and written by Wrigglesworth Consultancy, Wrigglesworth wrote:
“To illustrate the robustness of its portfolio of buy-to-let loans we have stress tested it under a range of scenarios. Under the severe scenario of the bank rate going to 5.75%, house prices falling by 23% and rent arrears reducing landlord rental income by 6%, the average loan-to-value (LTV) rises to 87% and income coverage falls to 104%. These are reassuring results that suggest that Landbay’s portfolio should withstand severe circumstances well.”
Landbay takes lots of precautions to protect your money, including:
- Maximum LTV of 72%.
- Spreading individual lenders' risk across loans in different regions of the country, so that not all your loans are in one area that might be hit by severe price falls.
- Rent must cover the monthly mortgage cost plus 25% extra.
- Landlords must have successful history.
- Unusually in property mortgages, the borrower's other finances not related to the property in question are also checked out to see if they are financially sound.
- Very tight requirements for borrowers who are thoroughly checked.
- Borrowers and their properties are checked by a mortgage broker first, then Landbay and then by lawyers of a trust set up for Landbay lenders. If any of them find the slightest flaw or have the smallest doubt then Landbay will not lend your money.
- A bad-debt provision fund of undisclosed size, but Landbay is currently adding 0.25% of loan balances to it.
Landbay* has not suffered any bad debts since it started matching loans earlier this year and it is forecasting just 0.05% bad debts on loans issued in 2014.
During the Great Financial Crisis of 2008, buy-to-let mortgages suffered just 0.35% repossessions, according to the Council of Mortgage Lenders.
*Commission, fees and impartial research: our service is free to you. 4thWay shows dozens of P2P lending accounts in our accurate comparison tables and we add new ones as they make it through our listing process. We receive compensation from Landbay, and other P2P lending companies not mentioned above either when you click through from our website and open accounts with them, or to cover the costs of conducting our calculated stress tests and ratings assessments. We vigorously ensure that this doesn't affect our editorial independence. Read How we earn money fairly with your help.