Six years ago, in October 2013, I left my job to start Landbay. Lots of peer-to-peer (P2P) lenders were live at the time but all in relatively risky areas of lending to consumers or SME’s so to provide customers with a low-risk option felt like it would present a compelling proposition. Buy-to-let (BTL) mortgages performed very strongly throughout the financial crisis and so we built the business around this.
Up until around early 2017, the restraint on our growth rate was our ability to raise the funds to lend. Every P2P platform has to balance the supply of funds (investors) with the demand for funds (borrowers). In the early days we couldn’t grow the volume of retail investors quickly enough and most months we were only lending around £1m a month. Later that year, we started getting loans funded by institutional capital and overnight we had to change the focus of the business to finding more BTL mortgage borrowers. Our sales and marketing efforts pivoted accordingly – we built a sales team, we focussed on creating the best lending products we could provide and concentrated on building a meaningful presence in the mortgage intermediary market.
Over the last five and half years, interest rates have fallen sharply within the mortgage market. When we launched, our rates for borrowers were around 5.5% and now our average is less than 3.5%. As we have reduced our rates for borrowers in order to remain competitive, we have had to reduce rates for retail investors. We have also reduced our fees so that Landbay has effectively absorbed some of that rate cut each time, thus squeezing our margins beyond tolerance, which is not sustainable.
Institutional funders now account for 97% of our business and our lending operation is gaining real traction. A few weeks ago we were named as BTL Lender of the Year for the second time at The Mortgage Introducer Awards, beating some of the largest banks and lenders in the space. We announced a new £1bn institutional funding deal in the middle of the year and have increased our staff by over 60% to 100 people this year alone. We see huge potential to grow the business and we continue to meet institutions that want to work with us and fund prime BTL mortgages enabling us to improve our proposition for Landlords across the country.
I am extremely proud of what we have built. We have now lent over £450m with no serious arrears or defaults, which means our retail investors have consistently earned the returns that they expected and have suffered no losses.
Therefore, and it pains me to say it, we have taken the decision to close the retail P2P funding element of our business and become a solely institutional marketplace lending platform. This is not a decision that we have taken lightly. The fact of the matter is that we would not have been able to get to where we are today without the retail business. However, it has been hard to see how to scale this part of the business on commercial terms that make sense.
The cleanest way to do this with minimal impact to our current retail investors has been for a UK bank to take on the current retail funded mortgage book so that our retail investors can get all their money back immediately.
There have been a number of other players that have pulled out of the P2P space and some quite high profile. I see no parallels between them and Landbay beyond the umbrella term of P2P we shared. We take this decision from a position of growth. We also do so at a time we have gathered a fair amount of recognition, winning eight leading industry awards this year alone, ranging from being named #28 in Deloitte’s Fast50 as one of the fastest growing technology companies in the UK, to Buy-to-Let Lender of the Year with three different award bodies. The performance of our lending has been outstanding. I cannot think of a P2P platform that has been in the market for as long as we have that has had zero defaults or losses.
I strongly believe that we can become a leader within the buy-to-let mortgage sector and make a positive impact on the private rental sector. We will continue to invest in our people, technology and brand and to build a successful business of scale.
Thank you to all the retail customers who have invested with us over the last five years.
Best wishes
John Goodall, CEO