Funding Secure started life in 2012 as a pawnbroking P2P platform. To date it has issued £175 million worth of loans and advertises an investor base 3,500. Although it started life as a pawnbroking platform, for the last 3 years it has taken on property backed loans also. Funding Secure loans are usually for 6 month terms and unlike some platforms who pay a monthly return, loans accrue interest daily but is not paid until the end of the term and only if the loan is settled.
Minimum deposit for Funding Secure is £100 made by bank transfer, with a £25 minimum loan part purchase. Rates of return on offer range from 12.00% to 16.00% per annum. There are no charges for lenders and Funding Secure offers a secondary market for early sell out dependant on a buyer being available.
The Secondary Market
Funding Secure’s secondary market place is a little more complicated than some of it’s competitors. When it comes to tax liabilities the individual left holding the investment at term is liable for the entire term. For example if you snap up a 3 month old loan hold it for the remaining 3 months you are liable for the tax on profit for the full 6 months. This is because the interest for the whole term is paid to whoever holding the loan part at maturity. To reflect this you can pick up secondary loans for as much as 1% discount (or a 1% premium if demand for a particular loan is high, or is closer to maturity) .
On the flip side of this if you are selling primary loans, and effectively passing on the tax liability, or selling for a premium (up to 1%) you can make a tidy profit (with a significant volume) when the it comes to tax liabilities at the end of the financial year. I would seriously suggest holding off from getting involved in the secondary market if you are either new to P2P or the Funding Secure platform for at least the first year because if you are not too savvy you may end picking up problematic loans with tax liabilities you ratter wouldn’t have. Some loans get dumped for a reason.
The Funding Secure dash board
Available funds – is the in-active balance on your account. This can either be invested (£25 minimum) or withdrawn.
My current investments – shows the total principle you currently have invested in loan parts. These funds can only be released on term and repayment of the loan, or a successful sale on the secondary market place.
Allocated funds – shows any funds you have put to a loan part that have not yet been accepted (interest will not accrue until the borrower accepts you offer of funds). It can take a little a while for offers to be accepted ( I’ve experienced as long as 3 weeks ).
Available investments – lists the investments currently available on the platform for investment. Information includes –
Reference – the loan ID.
Title – a brief description.
Amount – total size of the loan.
Rate – Anual ROI.
LTV – is the Loan to value of the security (capped at 70%).
Progress – shows how much of the loan has been funded so far.
Updated (scroll right) – shows any recent material changes to the loan.
Invest (scroll right) – shows the button to invest.
The results for the first 6 months of investing through Bricklane are in, and they are as follows –
Now there needs to be some background to these figures for them to make a little more sense. The Expected ROI is taken from a few published figures from 3rd parties and I levelled 5.00 % as a sensible average target. The fact is Bricklane don’t make a big deal of an expected return, partly because regulations require at least 2 years of track record to advertise a return as a figure (which Bricklane are not quite there), but the main reason being Bricklane is very different to a traditional P2P investment platform ( in-fact it actually classifies as an ISA) . It’s easy to calculate an expected return based on the given percentage for each loan part, but with Bricklane you are investing in a share of an overall property portfolio, plus a share of the rental dividend pro rata.
So although a near 90% disparity between ‘Expected ROI’ and ‘Actual ROI’ looks worrying, it’s not as bad as a seems. Bricklane charge a 2% deposit fee (ouch) on balances under £25’000 (1% for over £25’000), plus a 0.85% annual servicing fee. This meant it took a couple of weeks short of 6 months to realise a profit. If that trend continues for the next 6 months (without anymore deposits) that would result in an annual return of just north of 2%, based on portfolio growth. That is only one revenue stream though, the second being a share of rental income paid every 6 months.
At the time of writing this blog I have now received my first share of rental income dividend, however because it fell just behind the 6 months cut off for compiling these figures (it will be included in the figures for month 7) I didn’t want to distort the results for 6 months. I’ve give you a clue though, 5.00% annual ROI is looking fair right now.
To conclude, I must admit I’ve been lukewarm about Bricklane for months, thinking a 2.00% annual ROI (- 1.00% when factoring in inflation) is hardly call for cracking out the party poppers. Now with the rental income dividend paid, it starting to look a little more rosy. What i have always liked about Bricklane though is firstly it’s heavy weight backing ( backed by Zoopla ), secondly you are invested in owned bricks and mortar, not a debt transaction that can default like most P2P property platforms, finally there are no withdrawal transactions or secondary market queuing. So once you have paid the deposit you money is theoretically accessible at any time.
I am considering increasing my investment in Bricklane but it means writing off most of this years gains (at the cost of a 2% deposit charge) for higher gains later on down the line, which of course are never guaranteed.
The results for the first 6 months of investing through Lending Works are as follows –
For the first 3 of the 6 months the 5 year rate was set at 5.5%, which then increased to 6% (3 year rate currently 4.5%, March 2018) , so the 5.75% ‘Expected ROI’ is the average over the 6 months. This is a unique feature of Lending Works, both the 3 and 5 year rates are reviewed on a weekly basis and can go up or down the for following week. The discrepancy with the ‘Actual ROI’ can largely be put down account roll up (deposits/invested funds not falling on complete months), this is something you need to consider with most of these P2P platforms. In an ideal world you want a deposit to clear and start earning interest on the 1st of the month so you get a nice full maximum return for the month, in reality this generally dose not work. A lot of platforms still only offer deposit via bank transfer (Lending Works do offer Debit Card deposits) which typically take 2-3 days to clear, and then it can take anywhere from 1 to 10 working days for the funds to be assigned an investment opportunity and start earning interest. Hence why you should generally expect a slightly lower ‘Actual ROI’ to ‘Expected ROI’. This deficit should reduce tough the longer you are in a fund, providing the platform is delivering what they claim to be offering.
Lending Works also has a reason to shout about, in October 2017 it became the first P2PFA member to be granted full FCA authorisation. This is no small feat, as the P2P sector develops in to a maturing market, a number of platforms have fallen foul of the FCA and consequently shut up shop. Lending Works was also able to launch its own ISA in February 2018, meaning investors now have a tax free (up to £20’000) offering. Lending Work’s is also set to break the £100 million in loans mark in April 2018, just four years after opening its doors.
There is simply no reason for me to consider dropping Lending Works from my portfolio at this time. The returns are healthy and pretty much as expected, the company appears to be in good health the the future looks promising. That being said it’s still very early days for the platform and it’s place in my portfolio, so i will cautiously grow my exposure to Lending Works over the coming months and optimistically wait to see what the future brings.
The first year of investing through Landbay is up, and the results are as follows –
As you can see the the ‘expected ROI’ has dropped marginally. This is because most of the investment is in a fixed rate of 3.69% however this fund was closed a few months ago, with the the new fixed rate fund offering 3.49%, as the returns are reinvested in the new lower rate fund this is causing a downward pressure on returns.
What is less easy to explain is the increased deficit between ‘expected’ and ‘actual ROI’. It is true February is a shorter month which would have a marginal difference on the run rate of ROI at this time of year. The other factor that could be causing the gap to widen is a significant drop in demand. Now considering Landbay reserve the right to queue funds in times of exceptional demand for up to 6 weeks, something i witnessed early on in this fund (informed by a notification on the fund at the time) this is not something i have witnessed since. Along with this the time that monthly returns are queued for reinvestment seems to be increasing, sometimes as long as 2 weeks. This could be indicating a significant drop in demand for new investment.
Now the length of the queue for reinvestment should not have a negative impact on returns as Landbay is one of the few platforms that accrue returns on queued investments. Looking at the wider situation, Landbay is heavily London centric (55.01% Greater London) and average London house prices have fallen back 1.5 – 2% over the last 12 – 18 months , with predictions for 2018 seeing a further drop. This will no doubt cause some pressure on the Landbay portfolio but still does not fully explain the deficit. Fund roll up (first month not being a complete month) from my own strategy could also play a part, although this was not evident in the 6 month review. I have contacted Landbay for further clarification on the cause of the drop in return and will repot back as soon as i have a response.
As mentioned previously, the latest fixed rate fund is now at a lower 3.49%, this fund is also now based on 25 year mortgages (as of January 2018) rather than previously 10 year mortgages. This is not necessarily a problem as Landbay do offer sell out early options (dependant on a buyer being available) but it does indicate Landbay seem to be seeking increased stability.
As for Landbay‘s future within my portfolio, February 2018 has been the first month i have experienced an issue with the expected rate of return, of course i will look in to this further before drawing a definitive judgement. It has always been difficult to get exited by Landbay’s rate of returns (current 3% inflation) with not much more than 0.5% annual return in real terms. That said i still view Landbay as a foundation fund to a diversified portfolio, but it’s meagre returns are restricting me to keep Landbay as a relatively minor player in the overall portfolio. One big plus for me staying with Landbay beyond the returns, is it’s substantial wealth of research on the UK property market, which has been invaluable in constructing pieces for this blog. Landbay’s place is safe in my portfolio for the time being.
1 year has now elapsed since i started investing with Lendy and the results are as follows –
No. Live Loan Parts
No. Loan parts with repayments overdue
To compare these 12 month results with the previous 6 month results, the ‘Expected ROI’ has been reduced as i picked up a couple of 11% loan parts rather than the usual 12% loan parts. As for the ‘Actual ROI’ i should point out firstly a change in strategy. Several months ago i decided to sell off all my healthy loan parts and withdraw 20% (the most i could sell) of my liability from Lendy. This was a result of increasing concern about the lack of action on deteriorating/overdue loans. This action has been a factor in the gap widening from ‘expected’ to ‘actual ROI’ from 61.83 % to 68.13 %, although even with this factored in the trend is still diminishing returns, as part of the return is made up from affiliate credit earned through this blog.
Loan parts were also reduced in the sell off from 16 to 12. A massive 9 (10) of 12 are over due or in difficulties. The possible 10th is one the most perplexing instances i have seen from Lendy. This was a London based property loan that went live before due diligence was complete and it was quickly discovered that the borrow did not have the facility to repay the loan. As a result secondary trading of the loan was immediately suspended and hence investors have now been left holding a loan they can not dispose of as a result of Lendy making a rookie error. I should add though at this time interest payments are being made but i believe Lendy are being very optimistic to dispose of this loan with in the agreed term, so i believe this is destined to become yet another over due loan.
I have drastically changed my strategy over the last few months from fairly passive to aggressively selling loan parts very early. Despite this returns have continued to diminish. Some loan parts in possession are now approaching 500 days over due with little end in sight. While some loan difficulties are understandable, i.e legal process such probate where Lendy has zero control for a protracted period. There are other loan parts that have promised resolution by the end of the month, month after month with no action. I also have concerns that several huge loans (plus £10 mil) have gone live with Lendy in the last couple of months, given the recent administration of Collateral UK , with an £8.5 million loan being a possible contributing factor, this makes me a little nervous. While i’m not suggesting such a drastic outcome for Lendy given their much bigger investor base and larger cash reserves, it is still increasing risk to a larger number of investors and if the loans were to fail the shock waves could very worrying.
Lendy has also announced that it will be Cowes Week title sponsor again this year, personally i’m ambivalent about this as i didn’t really witness much of uptake of new investors after last years sponsorship, but i have a very small window in to the platform. Lendy has also introduced an improved friend referral scheme. A referral through a unique link (as i use on this blog) now results in a 5% (up from 1%) share of the new friends account interest for the first 12 months, based on £1000 minimum deposit, plus a £50 bonus for both the introducer and the new customer, based on £1000 being invested for 3 months consecutively. This potentially now makes Lendy’s referral scheme one of the most generous on the market.
As for Lendy’s future within my portfolio, i have already taken steps to reduce my liability and will continue to reduce to a predetermined level when i am able to. I would need to see some serious action and repayment of the problematic loan parts over the next 6 months to consider Lendy having a long term future with-in my portfolio.
The UK based P2P lender Collateral UK announced today (28/02/2018) it has formally entered administration. The platform was taken offline on Monday 26th of February 2018 with nothing more than a ‘server upgrade’ landing page in it’s place. As speculation grew on forums over the next few days, from the plausible to out right ridiculous, as to the cause of this suspension in trading, a letter from the administrator was finally released late this evening.
The administrators letter cites the reason for the administration as ‘ The Company was operating in the belief that it was authorised and regulated by the Financial Conduct Authority under interim permission. It has transpired that this is not the case and consequently the Company has ceased lending ‘.
It is still very early stages in proceedings but it would appear invested capital will be secured and wound down in an orderly manner. However it is yet been clarified what will happen to cash on account, what will happen to investments not yet drawn down, what will happen to this months interest due tomorrow morning and if or when the platform will go back online. If the platform does not go back live, many investors maybe left scratching their heads in obtaining exact and up to date figures of what they have on the platform. This could cause difficulties with capital claims or tax filling.
Emotions are still raw at this time and it would unwise to speculate further on how this situation came about in the first place. Undoubtedly more will be revealed over the coming days and i will update accordingly. However some comfort should be taken from the fact this is by no means the worst case scenario, if played out as purported investor losses should be minimal if any.
Bricklane is an online ISA lending platform exclusively operating in the UK property market. Established in 2014 Bricklane aims to create ‘ a fairer property market’. Bricklane offers a unique product in this area as it offers a combination of 2 financial products in one. You earn a return on investment on both portfolio growth and rental income. Bricklane is partnered with Zoopla (the UK’s biggest estate agent) so is considered to be well backed and relatively safe.
There are two options on where to deposit your funds in Bricklane at this time. You can either deposit in to the ‘London Fund’ or the ‘Regional Capital’s Fund’. The minimum deposit for Bricklane is £100 but there is a 2% deposit levy, which I must say is a little on the high side. With the addition of an 0.85% annual account fee.
Payments can be made by debit card (usually instant) or bank transfer (2-3 working days. You can either make a one-off payment or set up a monthly payment. Bricklane is also an ISA account so the balance is tax-free up to £20’000 in a financial year, for UK residents.
Withdrawals can be made from the entire account balance at any time providing there is demand to buy your investments, but it can take a couple of days to process.
The Account Page
Summary – shows details of both funds combined
London – shows details of the London fund. Scroll down the page to view specific properties in the fund
Regional Capitals – shows details of the Regional Capital fund. Scroll down the page to view specific properties in the fund
In your account – shows the total balance of your Bricklane account (notice from a £100 deposit its taken away the 2% deposit charge).
Earnings – Shows your total earnings to date across both funds.
The earnings graph – Shows your earnings in graph form for each week.