P2P lending set to transform the mortgage market
Christian Faes, co-founder and CEO of peer-to-peer lender, LendInvest, believes that the mortgage market can be transformed by P2P lending. In a recent interview he stated “So much of the property market is archaic … in today’s online world it is ludicrous that the average mortgage application with a high street bank takes three months to come to some sort of resolution. Adopting the principles of P2P and the advantages of technology we can dramatically reduce the time taken. Right now, we’re in a position to approve or decline a mortgage application in an hour or so, and to have the loan advanced on average within two weeks… by and large, the opportunity for P2P lenders - as well as other ‘proptech’ players - to disrupt mortgages is enormous”

FR: Why do you think the peer-to-peer industry is growing at such a rapid rate, and will it ever become mainstream?

Peer-to-peer lending and borrowing is growing fast because it makes sense in our modern personal finance world where people expect online tech and fast, transparent decision-making to come as standard. With things like Amazon and Uber these days, people are becoming more demanding about having a good consumer experience, and technology is driving that.

In the early years, P2P grew quickly because it was responding to people’s frustration with the ‘traditional’ personal finance industry. Savers were offered terrible interest rates and any borrowers lucky enough to be approved for loans could be lumbered with burdensome rates and unreasonable terms. Feeling fed up, both parties were driven to give ‘alternatives’ a try.

More recently, P2P growth has accelerated for another simple reason: more and more people have had a great experience of using P2P, they trust it and are sharing these experiences with friends and family who then also try it out for themselves. Word-of-mouth is an immensely powerful tool that our industry has used well.

P2P has already started to move into the mainstream. We are the fourth largest P2P platform in the UK after just two years, thanks to increasing public awareness of P2P as a valuable addition to a diversified savings and investment portfolio.

FR: How do you think peer-to-peer lending can transform the mortgage market?

It isn’t just the mortgage market that is ripe for transformation by P2P. So much of the property market is archaic, or at best outdated. For instance, in today’s online world where we can pay for groceries with the tap of a smartphone, it is ludicrous that the average mortgage application with a high street bank takes three months to come to some sort of resolution. Adopting the principles of P2P and the advantages of technology we can dramatically reduce the time taken. Right now, we’re in a position to approve or decline a mortgage application in an hour or so, and to have the loan advanced on average within two weeks. We expect that that will reduce further to a matter of days using online, data-driven processes that are fast, transparent and fair.

That said, there are some limitations to how automated the mortgage market can be. Property valuations still need the human touch, and solicitors’ sound advice would be hard to replicate by a computer. But, by and large, the opportunity for P2P lenders - as well as other ‘proptech’ players - to disrupt mortgages is enormous, as well as hugely exciting for me and my team.

FR: What steps can be taken to further inform and educate brokers about the benefits of peer-to-peer lending?

Events like the FS Expo are ideal for us to get out in front of the broker community to let them know who we are, what we do and what online marketplaces like LendInvest can do for them.

At LendInvest, we are lucky that we were property investors long before we entered the P2P lending market, and so we already have good, widespread relationships among brokers, packagers and other mortgage intermediaries. That’s not to say we don’t want to meet new contacts! Over the last few months we have actively grown our team of mortgage underwriters and business development managers who are on hand to talk to brokers, taking them through how P2P bridging finance like ours works best for them.

FR: How will regulatory changes continue to influence the market?

I am certainly not alone among P2P lenders to say that the right regulation is a good thing and should be welcomed. Regulation that is well conceived, well considered and - most importantly - appropriate to a young, tech-based and efficiency-focused industry only helps to validate the innovations we are making available to the wider investor and property markets.

FR: Have you got any big plans or exciting news coming up that you can tell us about?

Where do I start? This year we are set to lend approximately £300m which is almost three times more than the total lent in 2014 and is a tremendous achievement that we’re hugely proud of. To get to the point that we were able to do this, we secured London fintech’s largest ever private investment back in June and we recruited heavily across all our teams to bring our headcount to nearly 60 in the last few months. To maintain such strong momentum, we expect to double staff again by the end of next year.

We already command a 10% market share of the bridging finance market and believe that there is scope to extend that even further. In the long term though, through careful investment and a tenacious business-building spirit, we have the skills and capacity to disrupt a greater proportion of the UK mortgage market with broader, more mainstream, range of buy-to-let products.

FR: If you weren’t working in financial services, what would you be doing?

This is exactly what I have always wanted to be doing. I’m not doing anything else!