U.S. lender Citigroup Inc (NYSE:C) and U.K. fintech firm LendInvest have inked a deal which will see the former provide funding for mortgages offered by the latter. About half a billion pounds are already managed by LendInvest, a four-year old start up.
While other person-to-person lenders match borrowers with investors, LendInvest uses its own capital as well as funding from banks to finance the loans it provides. LendInvest’s management and origination of mortgages happens entirely online and is done using proprietary software. This has the effect of reducing overhead expenses as well as easing the management of complex portfolios. Under the deal, for every provided by Citigroup LendInvest will also fund part of it.
“A lot of what we do is fintech, but a lot of it’s also old-school finance. That’s a model that will allow us to be a more sustainable business,” said the chief executive officer and co-founder of LendInvest, Christian Faes.
The deal between Citigroup and LendInvest has come at a time when there is a cloud of uncertainty hovering over the property market in the United Kingdom as the country prepares to exit the European Union. In August the prices of homes rose by the slowest annual rate in a period of over five years according to online property portal Rightmove Plc. Warnings have also been issued by the Financial Conduct Authority and the Bank of England over the increasing levels of consumer debt.
The growth of online loans, which in Q3 increased to approximately 733 million pounds, has been attributed to fixed-income investors who are hunting for yield. There have also been a flurry of deals in the sector with Aegon NV, an insurer based in the Netherlands, placing 0.16 billion pounds with London-based P2P lender Funding Circle three months ago.
Part of the LendInvest’s appeal, according to the property investment team of Citigroup U.K., was the ability of the startup to utilize its funds in underwriting buy-to-let mortgages, a market worth about 40 billion pounds.
On Thursday shares of Citigroup Inc rose by 0.96% to close the day at $74.74.