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The first big test for the alternative lending industry

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Let’s tackle the elephant in the room: Peer-to-peer (P2P) home loans have had a turbulent 2019. While some platforms have performed very well and delivered great returns on investment for lenders, others have gotten bad press and unfortunately had to shut down.

Many people, lenders and borrowers alike, viewed P2P mortgage lending as a great tool for borrowers to unlock finance while still giving lenders access to a wide variety of offers that provide higher returns than cash deposits and volatility. lower than that of equity investments.

But many people have argued that the P2P home loan has yet to undergo its first test that would allow the market to gauge the strength of its business model.

When Covid-19 struck in early 2020, it quickly became clear that the pandemic would test the industry and provide it with a unique opportunity to prove its worth.

Fast forward six months since the lockdown began, we can now say that it was indeed a tough test for the industry, a test that has seen some P2P mortgage platforms gain strength as many other platforms have had to downsize or shut down.

At Blend Network, we had our biggest loan volumes in June and July. Our underwriting team made an average of almost £ 100million in loans per month between May and August.

Ability to lend

There is a simple reason for the observed strength which goes back to the purpose for which P2P mortgage platforms were created in the first place: traditional lenders had neither the capacity nor the appetite to lend and their absence has was quickly filled by dynamic lenders willing to step in and lend.

According to P2PMarketData, 14 P2P lending platforms in the UK have so far funded £ 16bn and almost £ 700m in the past 90 days.

According to these data, the P2P home loan platform Mixing network was the UK platform with the highest growth in loans over a 90-day comparison, an astonishing increase of 503%. Seven of the 14 UK platforms tracked have seen growth rates above 100% in the past 90 days.

Covid-19 has been an unprecedented period that has seen many lenders withdraw from the market, but provided an opportunity for P2P home loan platforms, which have remained open to increase their lending.

It was not only an opportunity to help new borrowers left behind by their lenders’ withdrawal, but it was also an opportunity to build relationships with new borrowers who valued the platforms that remained stuck with them. in difficult times.

He illustrated a key advantage of P2P mortgage lending platforms: the unparalleled quality of their customer relationships.

As a young and dynamic company that is on track to achieve 100% year-over-year growth in loans this year, we firmly believe that in the event of a crisis, it is paramount to be aware dangers but also to recognize the available opportunities.

In summary, Covid-19 provided a test for P2P lending and illustrated how the industry can and should be part of the solution and sowed the seeds of larger portfolio allocations to the asset class.

The pandemic has made P2P loans part of the solution and help the government deploy capital for SMEs.

Roxana Mohammadian-Molina is Strategy Director for a London-based mortgage lender Mixing network and sits on the Board of Directors of Women in Finance 2020