Savers and landlords can grab a better financial deal by working with each other, claims a peer-to-peer buy to let platform.
The platform, Landbay, argues savers can earn more interest and landlords can cut the cost of borrowing by shunning banks and building societies by doing business with each other through the company’s online platform.
Although savings and borrowing rates are competitive, one issue saver might have is investing with Landbay is not covered by the Financial Services Compensation Scheme (FSCS).
The FSCS covers up to £80,000 in bank and building society accounts to protect savers in the event of a financial crisis.
Lack of access to the FSCS also generally means savers cannot approach the Financial Ombudsman for redress if they have any complaints.
Savers can expect peer-to-peer rates of 4.2% fixed for three years or 3.5% for a three-year tracker with Landbay, compared to 3% on a five-year bond or 2.5% on a three-year bond.
Other bank and building society savings accounts offer rates of between 1.4% and 1.8%.
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.”
Landbay loans have variable rates depending on the risk of a deal, but to qualify, a borrower must:
- Borrow between £70,000 and £500,000
- The property must have a value of at least £100,000
- Rent cover is 125%
- The property must be in England or Wales
- All landlords must already own a home, have no adverse credit in the past 36 months and have an income of £30,000