P2P lender aims to rival pensioner bonds

Landbay claim that their lending is extremely low risk as all the money is lent as short term mortgages to experienced buy-to-let landlords. A recent Wriglesworth report commissioned by Landbay argued that secured peer-to-peer lending against buy-to-let properties has a "natural stability against economic shocks" compared to other types of peer-to-peer finance, such as unsecured personal loans to consumers.

Unlike Pensioner Bonds, Landbay’s product pays out interest each month rather than at the end of the term, and later this year will become tax free through inclusion in the new P2P ISA when it goes live.

The rates available to savers are attractive partly because of the higher cost of borrowing paid by buy-to-let landlords compared to owner occupiers. Interest rates on mortgages for buy-to-let borrowers stand at an average of 4.0%, a third more than the average of 3.0% paid by owner occupiers, according to an analysis by Landbay

The products include a Tracker that allows customers to lend from £100 upwards, with 3.5% interest paid each month and an option to withdraw capital at any time without penalty.

Landbay also offers a fixed rate product with 4.2% interest, paid each month, fixed for three years. Customers can still withdraw capital early, but may suffer a loss if the current fixed rate offered is higher.

John Goodall, cofounder and CEO of Landbay, said:

“There is no doubt that record low interest rates are leaving savers with very little to shout about. Low returns from high street savings products are pushing people to seek out alternatives. We think that secured lending to a diversified group of professional landlords hits a real sweet spot for savers in terms of risk and return.

“Residential mortgages have traditionally been financed by institutions through the wholesale money markets, cutting out the general public from the attractive returns that are available.  Our platform cuts out the banks instead, benefitting our customers by passing on these strong returns.”

Independent personal finance commentator Andrew Hagger said:  

“The returns on offer from Landbay may be lower [than other P2P lenders], but the overall risk management initiatives to protect customers’ money are the most comprehensive in the market.”