macq
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Post by macq on Sept 20, 2019 10:22:02 GMT
The only cavaet is that you will have some capital and interest paid back every month on the 5 year market so you will have to decide what you do with that, reinvest it in the 5 year market every month in new contracts or do something else. A 1 or 5 year bank bond that was mentioned doesn't work in the same way as the 5 year market in RS. The amortisation payments each month are very important to the decision wrt the 5yr. 1/ On the one hand in a 5 yr RS loan your capital is on average actually invested for just over 2.5yrs (2.65 to be more precise by my maths because capital repayments are slightly weighted to the back-end) because of the repayments. So you are not getting the 5yr rate for 5 yrs. You have made a small loan for a month at that rate, another for 2 months etc.... Only 1/60 of the loan is actually for the whole 5 yrs. 2/ But on the other hand that does mean you are getting fee-free access to some of your money plus the monthly interest. 3/ And then there's the "reinvestment risk" which has been pointed out by r00lish67 - that you have to decide what to do with those repaid funds. All different aspects of the same point but more complex than initially appears. But with the new product if you run it as RS want (and probably most so called "dumb" money will) then repayments go back in at the same rate with a penalty to access so by picking the max 90 day rate over plus 30 days using any reasonable amount of time then then there does not seem to much of a decision except access free for very short term
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thedog
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Post by thedog on Sept 20, 2019 10:30:48 GMT
True, Dumb money will do what Dumb money does but they're not us are they?!? I've not given much thought yet to the new products but yes tactics will have to change if (when....) the old products are discontinued.
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aju
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Post by aju on Sept 20, 2019 11:52:39 GMT
It's a shame they can't make it a bit more like Zopa - oops what am I saying i'll wash my mouth in carbolic soap or whatever it was granny used to subject my brother and I to when we let a swearword slip in our younger days.
Thing is though on Zopa for all its go slow faults recently at least one can move repayments to holding if one wants to set it accordingly across all their products - unless they have changed it lately again!. Mind you if the development tools they are using are as slow as their website is then it will take them a month of sundays to change it again anyway. Why is it that developers always have the fastest kit but never seem to game it with users kit, in my day we always insisted our websites were fully tested on the slowest kit possible, I guess assumptions have changed since I retired to the countryside.
That said for RS I just do what I guess all of us here do and that is set the relend rate to a higher - dare I say opportunistic - level that enables us to just go in either weekly or monthly and reset everything and either withdraw fee free or set better levels of lending. I do agree though it's going to be harder to judge when one cannot see the amounts in each price point its set in. ( I do have a spreadsheet that uses lend data that tells me the best day to do this, or I use the RS monthly data to see this if they haven't removed/moved it.)
Added to this is my concern that our exposure needs more thought I think - especially on the unprotected zopa loans side (We sold considerable amounts and turned relend back on and are suffering quite a hit on monthly returns but are hoping the relent loans will start to cover the hits soon!).
This new change on RS should make us realise that change will always happen I suppose, I don't mind changes when they are structured and well thought out and actually create improvements, but I am getting concerned like others that RS is on a slippery slope to the wrong side of my personal comfort levels that I will be able to get a return that I can live with. My return philosophy has always been to be able to better the inflation rate and add a little on top so getting 5.5%-6% before sellout fees on the 5yr was not bad if I wanted out quickly. I'm less sure about the new rates - they are still higher than Zopa in my experience lately despite their headlines - and our exposure is too high in Zopa rather than having to withdraw from RS though.
I guess I will give it a 6 months or so on the new system and see where we are when the 2020/21 financial year dawns.
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Post by propman on Sept 20, 2019 15:26:07 GMT
Other than having to manually cancel / edit the "offers" made on repaid money set at maximum rate allowed, I don't see there is much difference except the loans that are available (ie it will now include bullet repaid loans). I am concerned that given their history RS will extend bullet loans beyond 1 year. As explained above, if they lend a bullet 5 year loan, this is a very different beast from an amortising one. As it stands, 5 year loans form a type of 5 year annuity. This allows money to be spread in time and across loans to reduce the likelihood of large amounts unlnt and allow the rate to reflect how it moves through time. It also ensures a regular source of funds so that opportunities can be funded as they arise. For those that might need access, with bullet loans it is much more likely that RYI will need to be used. Such investors will need to risk the fees, or keep some funds in the lower paying markets.
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jlend
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Post by jlend on Sept 20, 2019 15:55:05 GMT
Other than having to manually cancel / edit the "offers" made on repaid money set at maximum rate allowed, I don't see there is much difference except the loans that are available (ie it will now include bullet repaid loans). I am concerned that given their history RS will extend bullet loans beyond 1 year. As explained above, if they lend a bullet 5 year loan, this is a very different beast from an amortising one. As it stands, 5 year loans form a type of 5 year annuity. This allows money to be spread in time and across loans to reduce the likelihood of large amounts unlnt and allow the rate to reflect how it moves through time. It also ensures a regular source of funds so that opportunities can be funded as they arise. For those that might need access, with bullet loans it is much more likely that RYI will need to be used. Such investors will need to risk the fees, or keep some funds in the lower paying markets. RS already have bullet loans in the Rolling market. This change was made earlier this year as there was insufficient lender demand for the 1 Year market. With the single queue in the Access, Plus, Max products I am assuming you could get matched to a bullet loan in any of these 3 products from October.
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