Rebuildingsociety launches new ‘Low LTV’ product
Rebuildingsociety is introducing a new ‘Low loan-to-value (LTV)’ category with lower rates for borrowers to make itself more competitive in the secured business loan market.
The peer-to-peer business lending platform said that it has taken “a cautious approach” over the past six months, adjusting its credit assessment process amid economic uncertainty, which has resulted in fewer loan applications making it on to the marketplace for lenders.
Rebuildingsociety said that the new product will result in an increase in the number of loan applications on the primary marketplace.
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“Significant increases in operating costs across most business sectors have reduced small- and medium-sized enterprise profits, and the pinch on consumers’ pockets has also reduced turnover for many B2C businesses,” Rebuildingsociety said in a blog post on its website. “These two factors, alongside others, have made it much harder for businesses to access finance, and have also made our task of assessing the creditworthiness of a business over a five-year loan term much more challenging.
“We have noticed an increase in businesses seeking to take finance secured on their properties, however our higher interest rates have historically made us uncompetitive for secured lending. So, in order to facilitate more opportunities for both lenders and borrowers, we are introducing a new ‘Low LTV’ category for secured business lending.”
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Rebuildingsociety also announced that it has refined its credit risk assessment process to improve efficiency and to place a higher weighting on the LTV ratio where a property is being offered in support of the loan.
To be considered under this new model, a borrower will need to offer security over a property and will need to demonstrate an LTV no greater than 70 per cent on a second charge or an LTV no greater than 75 per cent on a first charge.
“We’re confident the addition of this new process for well-secured loans will allow lenders to diversify their lending portfolio by providing more secured lending opportunities at a wider variety of interest rates,” the platform said. “This should result in an improved long-term net return, with the increased security guarding against an overall net return decline in the event of further economic uncertainty or a downturn.”
Rebuildingsociety has disabled auto-bids on the new ‘Low LTV’ secured loans as all lenders may not be aware of the changes. In order to participate in these loan auctions, lenders will need to manually bid on the primary marketplace.
“We’re hopeful this change will result in a more active primary marketplace by allowing us to offer loans from a profile of borrower who we have traditionally been too expensive for,” the platform said. “We’re continuing to accept and review loan applications that don’t meet the new security and LTV criteria, and these will go through our normal review process and be listed as they are currently.”