LendMe to sidestep home deposit rules
A new online company may help first home buyers sidestep Reserve Bank rules which require them to have a 20 per cent deposit to qualify for a mortgage.
LendMe will help people borrow money directly from lenders, including other members of the public, through an online marketplace, while allowing borrowers to offer property as collateral for their loans.
LendMe is the second company to get the green light from financial regulators to offer what is known as "peer-to-peer" (P2P) financing, following a law change last year.
The other company, Harmoney, which is 15 per cent owned by online auction site Trade Me, has set up a website to facilitate personal loans but has so far steered clear of the mortgage market.
LendMe founder Mark Kirkland expected LendMe would launch in three months and would facilitate at least $50 million of loans in its first year.
"Our intention is to become New Zealand's most trusted 'P2P' lender specialising in secured loans between $25,000 and $2m," he said.
"We are delighted to join Harmoney in helping disrupt the New Zealand financial services sector. There is room in the market for a number of players."
LendMe would offer secured loans for top-up deposits, home purchases, residential investments, commercial property, business growth, new equipment and rural investments, he said.
Kirkland said LendMe was in talks with New Zealand and overseas banks that wanted to invest funds through its platform.
"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 (loan-to-value restrictions), will be able to borrow 100 per cent through LendMe to purchase a home," he said.
Kirkland said the Reserve Bank rules governing mortgage deposits were "completely arbitrary and the market should rule".
"It probably won't take the Reserve Bank too long to figure out there is avenue where people can get past that. But the problem is, if they start regulating peer-to-peer lending where do they stop?"
The Reserve Bank confirmed it had no plans to extend deposit rules to P2P lending.
Kirkland did not expect LendMe lenders would beat mortgage rates offered by the banks "but a lot of [borrowers], for a variety of reasons, won't be able to go to a bank, or won't want to go to a bank. We will probably be able to be beat rates from any financier, other than a ... bank."
LendMe said it also planned to cater for "older kiwis who are excluded by banks from borrowing money based on their age".
"Access to money for older people can be very difficult even though they may have an impeccable credit history and good security to offer lenders," Kirkland said.