Risk factor puts homeowners off peer-to-peer lending

Risk of losses is the main factor deterring many homeowners from considering peer-to-peer lending new research has revealed.

A survey of 2,000 homeowners by YouGov on behalf of buy to let peer-to-peer platform Landbay revealed that 42 per cent are put off by the perceived risks attached to such options.

Despite this, younger generations were found to be more open towards taking risks as 28 per cent of people aged 25-34 years cited it as an issue, compared to 46 per cent of those aged 55 or above.

Raising awareness

The survey also revealed a need to raise awareness of peer-to-peer lending options as 22 per cent of those questioned did not know it existed while 17 per cent were unsure of how it works.
Despite this, one in twenty people invested through peer-to-peer platforms with one in three investing up to £999.

One fifth of those questioned invested £5,000 or more into peer-to-peer lending, perhaps seeing it as a more flexible solution to more traditional buy to let options.

The study recognised a divide between those investing at either end of the spectrum – those trying out the platforms and those who invest heavily with a sound knowledge of how it works.

Understanding the options available

“At Landbay we’re open and up front about the risks involved on our platform, but we’re equally open about the unique range of protections our model offers,”

explained co-founder and chief executive of Landbay John Goodall.

“We’ve based our proposition around creating the most risk-proof peer-to-peer platform, in an industry sometimes reluctant to mention the R word.”

He added that the results of the survey showcase the need to embrace and debate risk in financial planning so that people are more aware that options beyond cash savings exist.

“The question is whether too many people see it as a binary choice between keeping all their money safe in the bank or putting it all at risk. Instead it should be about finding the right balance to achieve what you want to with your hard earned cash.”

Landbay is just one of a growing number of peer-to-peer platforms but currently, it is the only one that operates solely in the buy to let mortgage space. Its borrowers include landlords with large portfolios of rental property and those financing through limited company vehicles. Unlike many traditional, mainstream buy to let lenders Landbay will accept more complex property types (including HMOs and multi-units) and borrowing scenarios making it an increasingly popular choice for landlords looking for finance in a limited company capacity and those with larger portfolios of rental property.

18th April 2015