Property borrowing to get easier with arrival of LendMe
New Zealand’s residential property borrowing environment is set to blow wide open with the news that LendMe has received New Zealand’s second peer to peer (P2P) lending license.
LendMe has received its P2P licence from the Financial Markets Authority (FMA) and will be the country’s first P2P lender to specialise in secured lending.
Unlike New Zealand’s first P2P lender Harmoney which deals in smaller scale consumer finance, LendMe will offer secured loans* with a focus on home purchases, residential investments, commercial property, business growth, and the rural sector.
LendMe founder Mark Kirkland said the company’s intention is to become New Zealand’s most trusted P2P lender specialising in secured loans between $25,000 and $2 million.
The fact that P2P lenders are not regulated by the Reserve Bank provides them with a particularly attractive point of difference for those wanting to buy property, he said.
“Borrowers who can show a good credit history and ability to service debt, but don’t have a deposit and can’t borrow through the traditional banks due to the current LVR restrictions, will be able to borrow 100% through LendMe to purchase a home.”
For investors, this means they should be able to sidestep any restrictions aimed at property investment lending that the RBNZ might introduce in future.
Kirkland, who is a former vice president of the NZ Property Investors Federation, said that such restrictions are arbitrary and do not take into account individual circumstances.
LendMe’s online platform, which is intended to function like a dating service for borrowers and lenders, will instead assess all borrowing applications on a case-by-case basis.
“We won’t be in the business of excluding loans. Obviously, that doesn’t mean that every application will be successful. But everyone will get a chance and, if a lender likes their case, their application will succeed.”
Another point of difference for LendMe will be an openness to older borrowers – who often struggle to secure loans.
Kirkland said this should make the lending platform attractive to older investors wanting to further build their portfolios.
While ordinary New Zealanders can be involved in LendMe as lenders, a lot of the loans will be taken up by institutions and funds.
The company is currently in talks with a number banks, both in New Zealand and overseas, about being potential institutional investors.
Kirkland said lenders can expect to receive higher returns on their money, than from traditional investment opportunities, and will know exactly where their investment is going.
However, he added that, until the institutional investors were confirmed, he couldn’t say what the borrowing rates were likely to be.
“The best borrowing propositions won’t be far away from what the banks are offering. Although as the risk profile increases, so too will the rate.”
The arrival of P2P lending in New Zealand is a once in a generation change for both borrowers and lenders, Kirkland said.
“We will provide a viable alternative to traditional financial institutions by connecting people who want to borrow and lend money – Kiwis funding Kiwis, through a secure and trustworthy platform.”
LendMe is about three months away from a serious, hard launch of its platform and services.
While it will be online-based, Kirkland said they are also planning to transact business through the broker market.