Is loan availability restricting your investment?

Whilst I have voted based on today, the movement to the trust model would change things and my answer to this vote for me.

I imagine that the supply problem can only get worse (at least until the first major loss.). More people are discovering p2p, ISAs are on the way and little chance of any significant rise in bank rate for a couple of years. Theoretically market forces should have produced an alternative platform paying 10 or 11% but with more loans available. Is this a failure in the market or high barriers to entry?

After 21 votes an average of about £5k (assuming those voting for more than £9k are not much more than that). If this is representative (probably not) SS can multiply the number of active investors by £5k to  estimate the demand.

Edit: A subsequent poll showed that there are a substantial number of investors with over £40 waiting so this poll is useless at estimating latent demand.

It's a higher number of smaller loans (up to £1m) that we need - assuming the quality is maintained. Everyone wants to spread their investment so supplying (say) £500k x 10 loans will be much more effective than (say) one loan of £5m. (SS obviously know this because a number of recent loans have been split into 3 parts.)

However, even though things are particularly tight right now, this is a very recent phenomenon. If I look back over the last couple of weeks or so (going back to 24 July) I have managed to invest nearly £40k. And that doesn't include PBL50 which I passed on because by then I was fully invested. While I was mainly investing in new stuff (in particular PBL46 and PBL49) I also managed to get hold of a number of different loans on the SM (going mainly for smaller, less frequently traded ones). I could have invested significantly more if I had the cash and was less fussy.

Maybe we have now got to a tipping point - but we don't have to look back very far to see that there was a healthier balance of supply and demand. As I mentioned in an earlier post, the recent position has been severely exacerbated by the withdrawal of PBL41 (due to planning issues) which returned £2.38m into investors hands. This has been looking for a home and has significantly increased the demand side of the equation.

I would much rather have to wait a while to pick up slices of high quality loans that meet the current SS due diligence criteria than see the whole proposition undermined by chasing higher volumes and suffering the defaults that plague other P2P platforms. Much better to earn 12% on X and get 100% of your capital back than invest 2X or 3X and see the interest seriously eroded / wiped out by capital losses. Be patient, and ready to respond when new loans list, and you'll have no trouble reaching your SS lending target within a couple off months. A good tip is to log in first thing in the morning (6am-ish) when there are often existing loans with SM availability that will be gone within an hour or two. I bought another £1000 first thing this morning and could have had more if I'd wanted it.

You have earned over 18% so far. If this was diversified across 10 loans you could stand a total loss on one loan and still be comfortably ahead (assuming that loan diversification actually works on this site - I am still unclear about that). But a total loss would have to, I think, involve fraud. A more likely possibility is a partial loss. You could suffer a 25% haircut on half of your loans and still be ahead.


Edit: from site:
£48,020,307 loaned through Saving Stream

Investors have earned £1,937,018 in interest to date
So SS would have to suffer losses of over £2 million before investors, taken as a whole, lost out.

Ditto, but with the proviso that I would have to seriously consider to what degree intra-platform diversification is necessary.