Shift of Demand on UK Property Marketplaces

The market situation on UK property marketplaces for bridge loans with high interest rates has turned drastically in the past 2 months. For a long time before there has usually been much more investor demand than could be soaked up by loan demand. That the situation has changed is most visible on the loans on offer (mostly through the secondary markets). There is currently nearly 8 million GBP on offer on Lendy (that was close to nil 8 weeks ago). At Moneything there is 2 million GBP on offer and at Fundingsecure 0.6 million GBP. Collateral recently raised the interest rate for new loans from 12 to 14%.

So what is causing this change? I will look at possible causes and measures the marketplaces could take to react.

  • Have property prices peaked?
    Building activity and property prices are influenced by the economy. This Guardian article says UK house prices fell three month in a row. Should investors think, the economic climate is cooling down, they might be more cautious as loans to property developers would be affected in a downturn.
  • Defaults are rising on Lendy
    Loans that are more than 180 days overdue are categorized as default loans on Lendy. There are now 19 loans in default, with the total loan amount in these loans adding up to 23 million GBP. While this does not mean that money will be lost – the loans are secured by the property, it makes investors cautious and hesitant, asking more questions about valuations and collection procedures.
  • Lenders might fear that the assets become increasingly illiquid
    Part of the attraction of Lendy and Moneything in the past (aside from the high interest rate) came from the fact that loans could be sold very fast, usually within hours for most loans that were not overdue. That has changed on Lendy and might be currently changing on Moneything. However with the queues for sales building up on Lendy it is too easy to just look at the nearly 8 million GBP on offer and deduct that it takes very long to sell loans. Not all loans are equally liquid. I sold 400 GBP of DFL025 recently. Despite over 35,000 GBP in the queue before me, my part sold within 3 days.
    A major factor with the longer selling times is that on Lendy, investors forego interest while the loan part is on sale. On Moneything it continues to accrue interest while on sale.
  • UK investors are increasing their stake in tax sheltered IFISA products
    That is my favourite explanation. The shift in the above markets 2 months ago coincides with the launch of many IFISA offers on other UK marketplaces. Lendy, Monything and Collateral currently do not offer IFISAs. Check the database for best IFISA rates of other marketplaces. Fundingsecure has an IFISA. I am not currently investing on Fundingsecure, therefore I am not as closely monitoring the market developments on Fundingsecure as on Lendy or Moneything. But it seems that investor demand on Fundingsecure has not changed as much as on Lendy or Moneything. It is obvious that UK investors will prefer to invest in IFISA offers, at least until their yearly allowance of 20,000 GBP is reached.
  • Brexit and pound uncertainty pause international investors
    All of the above platforms are open for international investors. I currently run a survey among German speaking investors on my German p2p lending forum. 31% precent of respondents have already invested on UK marketplaces. But 5% want to reduce their level of investment because of the uncertainty of the pound development and for this reason 20% will not consider to start on UK marketplaces.

So what could marketplaces do and what measures are they already taking?

  • Attract more investors, increase marketing spend
    I believe this is already happening. Lendy revamped the referral program as of June 1st and Collateral announced it will launch one soon. Lendy will sponsor the ‘Lendy Cowes week’ sailing regatta. I have doubts this will be cost effective, but its hard to tell from the outside without access to hard figures. I know of other p2p lending platforms that sponsored golf events in the hope of targeting and attracting the right audience and discontinued that (for reasons unknown to me).
  • Launch an IFISA
    Actually I think this would most profoundly change the situation for Lendy. However for that Lendy first needs to get full FCA approval. Moneything has recently said it has put an IFISA higher on the priority list, but it is still not imminent but planned for later this year.
  • Find ‘different’ sources of capital
    This could be institutional money. Or a differently structed offer like the Lendy bond. But it is to early to tell how the Lendy bond is taken up.
  • Raise interest rates
    Collateral has taken this step. And Moneything offered 1 percent more on a very large loan. I don’t think Lendy will take this route as it recently moved from 12% interest for all loans to a broader range of 7 to 12% interest rates.
  • Change the model of the secondary market
    Lendy and Moneything currently have secondary operating at par value. The investor community seems split. While some applaud the simplicity and ease of use of this model, others argue to allow discounts (and possibly premiums). One argument for discounts and premiums is that it might better match demand and supply. Counterarguments are that p2p lending is not a high volume market and variable pricing would not be suitable and that premiums will attract traders. Also some feel that seeing discounts will furthermore undermine trust and deter new investors from signing up.
  • Show recovery results and better communication and transparency of collection efforts
    Obviously full recovery on defaults would be a most effective measure to increase confidence and trust of investors. However this will take time and I don’t think haste would do the results good. Therefore the only thing Lendy could do short-term is communicate more and in more detail.

What is your opinion, dear reader?

P.S.: On the continent at Estateguru with its 10-12.5% interest property loans there is no change of market conditions. Investor demand continues to outstrip loan supply.

New Lendy Cashback Offer 50 GBP for New Customers

Lendy logoFor investors, that considered using the Lendy platform, but have not yet signed up, now may be a very good time to do so, as Lendy is offering 50 GBP cashback to investors that invest at least 1,000 GBP on the condition that this amount stays invested for at least 3 month. Lendy lists bidge loans secured by commercial property. The interest rates are typically in the range of 7% to 12% and the loan duration is typically 3 to 12 months. Currently a lot of loans are offered on Lendy’s secondary market, which will allow easy diversification into several loans upon signup.

I have been investing on Lendy for 2.5 years now (when I started it was still called Saving Stream) and I reviewed my Lendy portfolio only last month on the blog.

Lendy is open to international investors. While a UK account is not mandatory, I suggest opening a UK bank account online via Transferwise – this will make things easier, if multiple UK marketplaces are used (my article on Transferwise Borderless account).

To get the cashback, just register at Lendy via this link and start investing.

See more p2p lending cashback offers and subscribe to be notified when new cashback offers are listed.

My Lendy Experience – Portfolio Review After 2 Years Investing

When I started in late 2014 the UK p2p lending marketplace Lendy was still called Saving Stream, but it rebranded this year. Lendy is a platform offering bridge loans secured by property. I last reviewed my portfolio performance here on the blog in January 2016. Since then the following major changes have taken place at Lendy:

  1. Different interest rates
    Initially all loans had carried 12% interest. Now Lendy assigns different interest rates to each loan. Interest range for investors on new loans now are in the range between 7 and 12%.
  2. Lendy sold the security of the second defaulted loan (Garden Center). While all lenders got principal and interest paid on this loan, the sale price of the security was below the loan amount. Lendy covered the shortfall from own funds (provision fund).
  3. Since March 2017 investor can not buy loans on the secondary market and deposit funds afterwards (this still is possible on the primary market). This has reduced liquidity of the secondary market somewhat, but in general it is still pretty liquid for those loans that have a middle to long remaining term.
  4. Since April 2017 there is a new default policy in effect. For loans more than 90 days overdue interest continues to accrue but will not be paid until Lendy has received payment by the borrower. All loans more than 180 days overdue are now automatically classified as default loans. The number of defaulted loans has risen to 14 at the time of this writing.

Especially the last point has triggered debates on the chances for recovery and there are concerns voiced among investors about to optimistic valuations. The secondary market swings from time to time between mosty empty (except for loans in default) and plenty.

My portfolio

I have continued to ramp up my portfolio reinvesting returns and making new deposits via Transferwise and Currencyfair. This was before the Brexit decision. As for now I am simply reinvesting. My portfolio amount is 10K GBP spread out over 14 different loans. The vast majority is in 12% interest rate loans. I have made three exceptions in the past, but usually only with low amounts and when rebalancing the portfolio, I try to sell these lower interest loans first. So far I have not had any loans in overdue or default state – but there are many of those on the platform (see above). My loans have long remaining terms with the shortest being 147 days at the moment.

My yield (self calculated with XIRR) so far is 12.1% in GBP. Unfortunately I deposited most funds during the time when the pound was at a high, therefore calculated in Euro currency the yield is only 4.4% for me.

Lendy is still one of my preferred p2p lending marketplaces, due to interest rates, real estate as a security and liquidity. I do see the risks in the valuations, but I figure that at least the security will cover part of the loan amount and will with a high probability prevent total loss in a defaulted loan. I might get more picky in selecting loans, but so far Lendy for me is actually a platform that requires less management and monitoring than several other marketplaces I use.

Lendy portfolio
Screenshot of top of my loan portfolio list at Lendy – click for larger view

 

Saving Stream Rebrands as Lendy

What was formerly Saving Stream is now called Lendy. The operator of the marketplace has been Lendy Ltd. already, it was just trading as Saving Stream for investors. Now under the new domain Lendy.co.uk the company has brought together its services for investors and borrowers citing feedback by users. There is some speculation that rebranding could have been necessary as a prerequisite to full FCA authorisation as the FCA may have objections to the “Savings” in the old name.

Lendy logo

The announcement email sent, reads:

Simplifying Saving Stream – The Lendy rebrand

Following feedback from users, we are integrating the Saving Stream platform under the Lendy brand. This is in order to simplify the brand and make accessing the crowdfunding platform easier for all our clients.

As part of the rebrand, investors and borrowers will now use the same website:

www.lendy.co.uk
Features on the refreshed site include a new Help Centre, with an extensive FAQ section and glossary. We’ve also added all of our recent news into a new Customer News section.
The rebrand has been guided by platform users who were very positive about the Lendy brand. We hope you like it. The Saving Stream website will be redirected to the new Lendy website in due course.

While the new brandname is short and fitting, I note that it is somewhat close to other offers in the p2p lending space e.g. Lendix or Lendit. There even is a p2p lending marketplace in Lithuania named Lenndy (double ‘n’).