Landbay Review

Landbay Innovative Finance ISA

Landbay IFISA

Around 18 months since the IFISA was formally launched in the UK, the Landbay ISA managed to jump the regulatory hurdles, and declared itself up-and-running. The ISA requires investors make a minimum £5,000 investment.

The maximum investment is the full ISA allowance which is currently £20,000. Customers pay no investment fees, and are able to transfer in funds from their current ISAs or any past ISAs they hold.

How to invest in Landbay’s IFISA

The process is a fairly simple one via Landbay’s website. Once you access the Landbay ISA page and begin the route to investment, you’ll have to:

Your bank details will also be needed – this is in order to run mandatory AML checks.

Once funds are invested and cleared, they can start to earn interest within 24 hours with an annualised rate of 3.75 per cent. You’ll be getting these returns on a monthly basis, whereby you can choose to withdraw or reinvest. Landbay states that this fixed rate could be for a period of around two, three or five years before you automatically switch to a variable rate – this is all dependent on the loans your money is invested in. You receive monthly interest payments which you can withdraw or reinvest.

The only applicable fees are a transfer out fee of £50, and if you’ve invested over the annual allowance, there’s a £50 repair fee.

Automatic diversification

Part of the whole idea of peer-to-peer is of course using technology and web platforms, promoting ease of use, and as much automation as possible. To this end, Landbay automatically diversifies investors’ funds across multiple loans.

This subsequently helps to mitigate risk in the instance of borrowers defaulting, by making sure investors aren’t exclusively reliant on one loan.

Secondary market

The secondary market tool lets investors automatically sell their loan parts to new investors. The mechanism however can’t assure that loan parts will definitely be sold. This all depends on whether there are people out there that want to invest.

Nevertheless, Landbay explains: “Under ordinary market conditions, the secondary market typically sells loan parts within a few days.”

Security

Whilst the platform has thus far had no defaults on any of its loans, it does hold a ‘reserve fund’ to safeguard against this possibility, a fund which is derived solely from Landbay’s borrower platform and products. In the instance of a default and/or shortfall, a claim for any remaining principal interest is made.

However, it is important to note that Landbay is not officially required to hold this fund, and that the amount that it holds and how the reserve fund is applied is entirely at the firm’s discretion, so nothing is set in stone. It doesn’t guarantee a claim will be approved, or that sufficient funds will always be available in the fund.

Landbay does nevertheless note:

“Our level of provisioning is based upon comprehensive, independent stress testing of our mortgage book and predictions of what losses might look like in a severe recession.”

This reserve fund is particularly significant to investors in the absence of FSCS protection. Do note however, that even though a platform such as Landbay holds a reserve where other platforms may not, these other platforms may hold an entirely lower level of risk in their investments, potentially levelling out the playing field. A reserve doesn’t necessarily mean better security.

Considering investing?

The partnerships, success and scale of growth Landbay has achieved have shown its rapid maturity from a startup to an established enterprise. With borrowers and lenders flocking to IFISA products, especially as ISA season creeps rapidly closer, it is definitely worth considering the pros and cons of a Landbay ISA, especially if buy-to-let holds your interest.

As one of the UK’s best performing asset classes, it could definitely prove worthwhile.

Originally Published: Friday, March 17th, 2017
Updated: Monday, December 10th, 2018

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