ceejay
Posts: 971 
Likes: 1,149
|
Post by ceejay on Jul 17, 2018 7:59:58 GMT
So I'm wondering at the moment if RS's One Year Market will be next for the chop. And then I'm wondering if there is any point to it, from either RS or Lenders' POV.
Bearing in mind that the underlying loans are the same ones as those in other markets, but just packaged differently, why would RS bother to pay the slightly higher rates over Rolling? (Say, an extra 1% or so at the moment).
And from the Lenders' POV, is there any point? In particular, is there ANY risk difference between putting money in the 1Y and 5Y markets? You'll only get your 1Y money back after the "contract" ends if there is other money to replace it, since the underlying loan is unlikely to be ending at the same time - so is that any different to the liquidity risk of planning to cash in a 5Y investment after one year?
Would it be the case that 1Y lenders who are due their money back will be prioritised over would-be 5Y sellers? (I'd hope so, but can't help feeling that there is only a very narrow band of circumstances in which this priority would mean very much).
If there is no risk difference, then it seems to me that it will almost always be worth paying the extra fee to exit a 5Y investment and taking the higher rate - except perhaps for the rare case that you really do mean to invest for exactly 12mo and then do something else with your money.
Am I missing something?
|
|
spiral
Member of DD Central
Posts: 908
Likes: 455
|
Post by spiral on Jul 17, 2018 8:17:15 GMT
Tax deferral!
Someone investing today in 5 year or rolling will get some interest back this year whereas investing in 1 yr (early repayments withstanding) will not receive a tax liability until the next tax year.
|
|
rscal
Posts: 914
Likes: 503
|
Post by rscal on Jul 17, 2018 12:10:58 GMT
The 1.2% (current) difference in sell out between 5yr and 1yr sure looks attractive from the 1 year POV.
Say after 6 months sell out 5yr paying 5.5%. 2.6% interest less 1.5% fee leaves 0.9% or about 2% pa Say after 6 months sell out 1yr paying 3.9% 1.95% interest less 0.3% fee leaves 1.65% or about 3.3% pa
[Just looking at the Rolling Market RS have created since 6th June, it is currently stuck with 1.4 million to be lent out at yesterday's fixed MR (3.4%) I'm wondering if RS will have to go into the 1 year now and raise a big chunk there simply to clear that out today? Are they actually obliged to clear the RM every day of at least the orders they queue themselves in this way?]
|
|
ceejay
Posts: 971
Likes: 1,149
|
Post by ceejay on Jul 17, 2018 16:29:50 GMT
The 1.2% (current) difference in sell out between 5yr and 1yr sure looks attractive from the 1 year POV.
Say after 6 months sell out 5yr paying 5.5%. 2.6% interest less 1.5% fee leaves 0.9% or about 2% pa Say after 6 months sell out 1yr paying 3.9% 1.95% interest less 0.3% fee leaves 1.65% or about 3.3% pa
Agree that if there is a significant chance that you might need your dosh back inside the year then the 5Y option isn't so attractive. But if you're in that position then I wouldn't fancy the 1Y option either - you'd be better off in the RM in most cases, and have more flexibility.
|
|
|
|
Post by propman on Jul 17, 2018 16:53:10 GMT
I think a substantial amount lent from the 1 year market is on property development loans that only payback at the end (ie on sale or refinancing). As a result there is no income to repay monthly and so an amortising loan would need to be in excess of requirements to have the funds to make interim repayments.
For the investor, there is the option of cherry picking the higher rates when they occur. These are more significant than the other markets as the loans are lumpy and a few large loans together exhausts much of the market leading to higher rates. it is worth waiting for these when there is the prospect of a year's interest, while the cash drag makes waiting for the rolling market uneconomic.
- PM
|
|
rscal
Posts: 914
Likes: 503
|
Post by rscal on Jul 17, 2018 17:08:14 GMT
Jeepers, the 1 year went to 5.5% just before 6pm! Now do we think that was needed by RS themselves simply to clear the 3.4% hurdle (with 900K still unlent!) set for themselves today? Eh, eh? ( I had my orders at 4.5% but could have been bolder I suppose!)
|
|
ceejay
Posts: 971
Likes: 1,149
|
Post by ceejay on Jul 17, 2018 19:17:02 GMT
...
For the investor, there is the option of cherry picking the higher rates when they occur. These are more significant than the other markets as the loans are lumpy and a few large loans together exhausts much of the market leading to higher rates. it is worth waiting for these when there is the prospect of a year's interest, while the cash drag makes waiting for the rolling market uneconomic.
- PM
Indeed, and as has just been pointed out, we had a nice peak today. I do have a bit circulating in the 1Y market at the moment on this basis. My main problem is that when the rates go low, they can stay there for quite a while. I used to use the RM as a holding pen when this happened, but since the RM rule changes I'm not sure that works any more as a strategy.
|
|
Stonk
Stonking
Posts: 735
Likes: 658
|
Post by Stonk on Jul 17, 2018 20:08:48 GMT
Jeepers, the 1 year went to 5.5% just before 6pm! Now do we think that was needed by RS themselves simply to clear the 3.4% hurdle (with 900K still unlent!) set for themselves today? Eh, eh? ( I had my orders at 4.5% but could have been bolder I suppose!) The spike was caused by a single borrower order for over £500K. That feels like it may well have been internal shenanigans.
Another factor perhaps in favour of this explanation is that RS let it match quickly all in one go, rather than dragging it out all evening as sometimes happens. I had barely made my deposit and got my order in at 5.4% when the spike happened and it was all over!
|
|
|
|
Post by Deleted on Jul 18, 2018 6:53:40 GMT
last matched 6.3% at 07:46 !!!
|
|
09dolphin
Member of DD Central
Posts: 630 
Likes: 856
|
Post by 09dolphin on Jul 23, 2018 16:07:50 GMT
Some for resale at 6% available now - but going like crazy.
|
|
cb25
Posts: 3,522
Likes: 2,666
|
Post by cb25 on Jul 23, 2018 16:20:11 GMT
Some for resale at 6% available now - but going like crazy. Market has 'crossed', Borrowers at 6.0% whilst showing Lenders at 5.0% !. Just added some money at 6.0%
|
|
star dust
Member of DD Central
Posts: 2,998
Likes: 3,531
|
Post by star dust on Jul 23, 2018 16:35:50 GMT
All gone next borrower offer at 4.4%. Managed to get some at 6.0% by adding and pulling my existing 6% to get it matched. Thanks for the heads up.
|
|
|
|
Post by misterp2p on Jul 23, 2018 16:57:01 GMT
Just happened to log on to RS and see 6% so added 1K just matched in time by the looks. PHEW!
|
|
lara
Posts: 345
Likes: 300
|
Post by lara on Jul 23, 2018 17:01:48 GMT
Some for resale at 6% available now - but going like crazy. Market has 'crossed', Borrowers at 6.0% whilst showing Lenders at 5.0% !. Just added some money at 6.0% Most peculiar!
|
|
cb25
Posts: 3,522
Likes: 2,666
|
Post by cb25 on Jul 23, 2018 17:11:01 GMT
|
|
