Home loan borrowers who do not fit banks' lending criteria are
turning to New Zealand's newest peer-to-peer lender to get their home
loans.
Lend Me officially launches on Tuesday, after months of planning and a beta test phase.
Peer-to-peer
lenders match borrowers with other retail investors who have money to
lend. There are now three operating in New Zealand: Harmony, Squirrel
Money and Lend Me.
Lend Me chief executive Marcus Morrison said his
platform had already transacted $630,000 of lending, including mortgages
and refinancing deals.
Lend Me specialists in secured loans, usually first mortgages. Borrowers can apply for up to $2 million.
In one case, a couple had a blemish on their credit record because of a disputed $400 bill.
"That particular loan was a refinance," Morrison said.
"They
were able to get a loan but were having to pay quite a high interest
rate and six-monthly rollover fees. We've managed to get their loan
sorted and they have lots of capital in their properties as security.
It's great for them and fo
Lend Me was charging them a rate of 8.29 per cent, which was cheaper
than they were paying previously. The peer-to-peer investor who put up
the money would receive 7.74 per cent for their money.
In another
case, a couple brought their loan to Lend Me when banks were hesitant to
lend because of their reliance on superannuation for income.
"They were able to service the loan with the income they had," Morrison said.
"It was low-risk for the investor and a good outcome for the borrower."
That couple were charged 9.19 per cent by Lend Me for a loan with 60 per cent equity.
Morrison
said there were a number of people who fell outside the normal lending
criteria but were still safe bets for peer-to-peer investors.
It
was initially suggested that because Lend Me targets big, residential
loans, it would be used as a way around the banks' loan-to-value rules.
Non-bank
lenders are not subject to the restrictions which force banks to curb
their lending to people with deposits of less than 20 per cent of a
property's purchase price.
In theory, Lend Me could lend 100 per cent of a home's value, if an investor was willing to take that risk.
But
Morrison said there had been no demand for that sort of loan yet. Most
loan inquiries have related to lending worth 65 per cent to 75 per cent
of properties' value.
Morrison said Mendel's reliance on secured
lending should give investors more confidence that it was a safe place
to put their money, and would offer better returns than term deposits.
"It's a genuine alternative
r our investor."
