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Will P2P lending threaten mortgages?

The Australian mortgage industry has voted on whether or not it views peer-to-peer (P2P) lending as a threat.

Mortgage Business polled 120 readers, of which 32.5 per cent said P2P lending does pose a threat to mortgage brokers.

However, a majority (67.5 per cent) saw no threat from P2P lending, which has been gaining momentum in recent years, culminating in the initial public offering of US-based Lending Club at the end of last year.

Lending Club is now originating over US$1 billion in personal loans per quarter.


The group's December 10 listing on the New York Stock Exchange created a global benchmark for the new industry.

However, Deloitte partner, financial services, James Hickey sees no threat to the mortgage market from P2P lending.

Mr Hickey told Mortgage Business that, as he understands it, peer-to-peer lending is primarily around the personal loan market, in which lenders can achieve bespoke customer pricing and greater differentiation around risk assessment.

“Hence certain investors may have a different risk profile or risk tolerance which may be differentiated at a more granular level for personal or small-ticket lending,” he said.

“When you look at mortgage brokers, they are primarily dealing in the home loan market, which is an area where the peer-to-peer lenders haven’t really pushed yet.”

Mr Hickey’s comments come after Australia’s largest peer-to-peer lender, SocietyOne, completed a successful capital raise last month, with a consortium of eminent Australian investors made up of Consolidated Press Holdings (CPH), News Corp Australia and Australian Capital Equity.

The lender also welcomed the explicit acknowledgement by the Murray Inquiry of the role that technology-based innovation and particularly online lenders could play in boosting competition and consumer choice.

“SocietyOne is also encouraged by the recommendation that government should look to encourage, and if necessary mandate, the move to comprehensive credit reporting as proposed in SocietyOne’s own [Financial System Inquiry] submission,” SocietyOne co-founder and chief executive Matt Symons said.

“SocietyOne also supports the creation of an Innovation Collaboration Committee and welcomes the opportunity to actively participate in such an entity that could bring together senior industry, government, regulatory, academic and consumer representatives who are likely to be shaping the discussion about how to foster and support innovation,” Mr Symons said.

Peer-to-peer providers Ratesetter Australia and ThinCats Australia told Mortgage Business that banks and brokers would retain their stranglehold over the mortgage market for the foreseeable future.

However, Ratesetter chief executive Daniel Foggo said one way peer-to-peer lenders could make an immediate impact would be to help borrowers increase their deposits and sidestep LMI.

"Peer-to-peer lending for credit-worthy borrowers can provide more cost-effective personal loans, so that may be where peer-to-peer lending can play a meaningful role early on," Mr Foggo said.

"If they've got a good credit history, it's going to be a very competitive loan, so they effectively save themselves quite a lot of money."

ThinCats chief executive Sunil Aranha said the peer-to-peer sector is currently much too small to threaten the control that banks have over the enormous residential and commercial sectors.

Mr Aranha added, however, that peer-to-peer lenders have the potential to one day capture a majority share of the mortgage market – but that brokers should not be worried.

"There's always going to be an intermediary who arranges loans, and that's based on relationships far more than market presence and numbers," he said.



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