Online P2P lenders in the U.K. may soon be leaving the digital-only world in favor of getting a toe into brick-and-mortar business — specifically, when it comes to mortgage underwriting.
Among the firms leading the charge is LendInvest, which hopes to become the United Kingdom’s largest mortgage lender and is taking a long look at a high street location to do it from.
“What makes most sense to us is to purchase an ‘offline’ lender,” said Christian Faes, chief executive and cofounder. “[We are looking for] one that has experience originating credit but doesn’t have the technology and perhaps is perceived as a dying brand or just doesn’t have a brand.”
Faes further noted that the conventional wisdom — that online borrowing has a natural cap because only a handful of borrowers will be comfortable with such underwriting — is just wrong.
“With mortgages, you always have an element of offline,” he said. “I think we can be the biggest mortgage lender in the country and not have capacity constraints.”
“I strongly suggest that the losses on peer-to-peer lending, which will emerge in the next five to 10 years, will make the worst bankers look like absolute lending geniuses,” Lord Turner, a former chairman of the Financial Services Authority, said last week.
And that sort of large-scale crackup is intimidating, given how large the P2P sector is now and how very large it could become if it became a major player in the ~$290 billion mortgage market in the U.K.
“Most mortgages are now arranged via mortgage brokers and financial advisers, rather than through branch networks, so the competitive impact from P2P lenders moving into high street outlets is limited,” a spokesperson for the Coventry Building Society said.