Peer- to-peer lender completes first residential ‘mortgage’
Peer-to-peer lender eMoneyUnion has lent the first ever crowdfunding platform to complete a first charge consumer secured loan.
The loan, which is not referred to as a mortgage, was for just under £30,000 secured on a property in the North West.
The loan-to-value (LTV) was 11 per cent and the purpose of the loan was debt consolidation.
eMoneyUnion CEO and founder Lee Birkett said this is the first of its kind anywhere in the world and marked a major turning point for community lending to consumers.
“Peer-to-peer lending can provide a legitimate alternative to those who may be finding traditional lending sources not wishing to lend due to ever restrictive underwriting criteria,” said Birkett.
“We let the people decide if they deem someone a good risk or not based on commonsense guidelines.”
Borrowers can obtain interest-only loans and borrow into retirement by taking out a first or second charge loan.
Birkett said: “If a borrower can prove affordability, we will lend up to 85-years-old. The decision to lend is made by investors, it’s a grown up way for finance to function.”
The type of consumer who would choose to fund their house purchase in this way is unlikely to be a first-time buyer because the rates are expensive.
The interest rate of the completed first charge was 18 per cent over a term of 25 years while investors will receive a monthly yield of 10 per cent.
But Birkett said first-time buyer attitudes may change in the future.
“First charge loans for home purchases through peer-to-peer in the US are proving very popular among families lending to offspring. We have been approached by a major developer to provide second charge loans to aid new home purchase, so nothing is off the agenda. It’s all down to market forces and common sense lending and affordability.”
Borrowers using peer-to-peer funding as a second charge on their home do not have to go through the consideration process which borrowers using the traditional method would be subject to.
First and second charge borrowers are entitled to a 14-day cooling-off period and no early repayment penalties are applicable.