A new peer-to-peer lending platform is launching in the UK to provide funding for investors seeking to finance property development and buy-to-let projects.
CrowdProperty is seeking to raise 20 million pounds from individuals in its first year of operation. It will target 100 million pounds in the second year and 250 million pounds in year three.
The latest launch provides more evidence both of the appeal of property and the attractions of peer-to-peer platforms as alternatives to high-street banks. With official interest rates still at a record-low 0.5 per cent, individuals are drawn to the high returns — potentially above 6 per cent — promised by p2p sites along with the perceived security of property.
LandBay, another peer-to-peer site specialising in mortgages for buy-to-let investors, launched in May, while LendInvest, which offers short-term loans of up to three years to landlords, entered the market in 2013. Individuals using CrowdProperty can lend a minimum of 500 pounds through the platform, which is loaned to borrowers wishing to fund or refinance a property development project or buy-to-let investment. Investors can spread their loans across multiple projects.
CrowdProperty takes a one-off 3-5 per cent arrangement fee from the borrower, and then passes gross interest payable — between 5-11 per cent — back to the lenders. Borrowers can apply for up to 100 per cent finance on new developments, at rates of 9-11 per cent per annum, or up to 80 per cent loan-to-value for refinancing projects at 5-6 per cent.
CrowdProperty also secures all loans with a “first legal charge” against the property asset lent against, giving the platform the option to repossess the property if the borrower fails to maintain payments. Simon Zutshi, founding director of CrowdProperty, said the platform was created to address the “current problems” for investors in a low interest rate environment and as lending restrictions are implemented by the banks.
“Many property professionals in the UK were not getting the money they needed to make profitable property developments happen and most everyday people were not getting as much interest as they would like from their savings,” he said.
Borrowers’ proposed projects are put through due diligence tests to check they are robust. On receiving approval, projects are added to the site’s projects section where individuals can pledge money. Contributions are only taken once a funding target has been established.
Peer-to-peer lending came under the Financial Conduct Authority regulation in April, but investors do not have recourse to the Financial Services Compensation Scheme if providers become insolvent.
The government announced in its last Budget that it would allow peer-to-peer investing within tax-free individual savings account wrappers, and is set to consult on the issue in September.