P2P property lending key to solving housing crisis
Peer-to-peer property lending can play a key role in solving the ongoing housing crisis, as evidenced by the ongoing success of the sector, easyMoney has said.
The UK is still struggling to meet its annual housebuilding target, while property developers up and down the country are failing to secure the funding that they need to get new projects off the ground. As the base rate inches ever higher, the cost of borrowing is rising and many small- to medium-sized enterprise (SME) housebuilders are bearing the brunt.
However, while banks are scaling back their support of the housebuilding sector, P2P lending platforms are stepping in to fill the gaps.
easyMoney has funded more than 600 properties through its loans. The P2P property lender has a current loan book in excess of £165m, and has funded loans to the value of £300m since its inception.
“We are supporting the SME house developers,” says Jason Ferrando, chief executive of easyMoney.
“This borrower is usually the one that finds it harder to borrow from a mainstream bank, and in the current climate finding it even harder.
Read more: P2P investors plan to keep on lending despite economy woes
“Back in 2007-2009 it was impossible for a SME home builder to get a quick loan from a bank (if at all) and we are seeing some of this today. Our borrowers have one thing in common, speed.”
The average time for a borrower approval can range between three hours and five days, but this very much depends on if the borrower has their paperwork in order.
“We are very quick and efficient at our end and pride ourselves on our systems to make sure we have done everything we can, but each case and individual is different,” says Ferrando.
“So, the main factor really is the speed and efficiency of the borrower or broker. There are also unforeseen factors that are out of the borrower’s control.
“All being well, we can give a decision very quickly, and we can fund the loan equally as quickly.”
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easyMoney has an approximate ratio of one loan approved for every four loans which are rejected. However, Ferrando adds that many loan applications don’t even make it to the discussion stage for various reasons.
“What we look for in a borrower is experience, financial input, and evidence of a project with an exit route that’s executable,” Ferrando says.
“Most developments will have social housing written in the plans,” adds Ferrando, in a nod to the platform’s commitment to socially-responsible lending.
“We have a tremendous student housing accommodation project on the books, we have enjoyed working with this borrower and have enjoyed the loan. We will be funding further stages of this development in the future.
“We are proud of all the developments we have been involved with.”
Current borrower rates range between 0.9 per cent per month and 1.4 per cent per month, depending on the risk and background of the borrower.
To date, no investor has ever made a loss with easyMoney, due to the platform’s strict due diligence process on all loans.
“We always make sure the exit is viable, and that borrowers’ have financial investment alongside us, as well as a valid reason for borrowing the funds, good valuers, and lawyers,” explains Ferrando.
By prioritising strong projects with social value, easyMoney is building one of the most exciting and impactful property lending platform in the UK, just when the country needs more properties than ever before.
As Ferrando says, “P2P property lending can’t solve the housing crisis on its own, but it does go a long way to help.”
Read more: Demand for new-builds edges up in second quarter, finds easyMoney
