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Post by Financial Thing on Jan 8, 2016 15:49:35 GMT
And the return rates drop as the risk increases...reminds me of 2008.
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ablender
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Post by ablender on Jan 8, 2016 15:51:22 GMT
And the return rates drop as the risk increases...reminds me of 2008. Oh, what happened in 2008?
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Post by investor99 on Jan 8, 2016 15:54:50 GMT
Been lurking on this forum for a while and on Ablrate too. While I agree with most of you that 95% is risky, for me the key in this offering will be the quality of the borrower, someone that will continue paying even if property prices tank and they are in negative equity. The document refers to 'prime' borrowers with 'clean credit history' so it would be interesting to know the approval criteria. Their loan is granted at the same time as a high street bank which gives the first 85%, which is also a reassurance. I prefer taking a risk on a high LTV on a quality borrower securing his own house, rather than a 75% LTV on a half-built development, or an unsecured loan to an SME I have never heard of.
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grahamg
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Post by grahamg on Jan 8, 2016 16:05:48 GMT
Hi Guys Thanks for your comments on this one. We liked the look of it on the basis that the loans are for prime borrowers, clean credit file, owner occupied and the team at Influx are very good. Even at a higher LTV the credit underlying the payments are excellent. The company also has its own investors for the loans, so it was a little bit of a test to gauge appetite from our base. Sorry to cause the emotional rollercoaster... hopefully we will be able to keep your emotions at a more stable level this year! Regards Ablrate Don't like it at all, the slightest blip in the housing market or personal circumstances and we risk putting people into negative equity or them losing their homes, a big no no!
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alanp
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Post by alanp on Jan 8, 2016 16:23:24 GMT
A couple of points from me.
1) £100k is surely only around 8 "top up" mortgages based on them being £12,500 each, maximum of 20 if they were £5,000 each so not much diversification there meaning that the borrower selection criteria better be very, very good.
2) I know this one does not apply to everyone by any means but it does to me and I doubt if I am the only one. I can get 4-5% on my cash from a high street bank current account and /or regular saver after basic rate tax is deducted at source. With this I would only be getting 5.2% after tax so the Risk / Reward ratio is miles from where I would need it to be.
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ablender
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Post by ablender on Jan 8, 2016 16:37:13 GMT
Been lurking on this forum for a while and on Ablrate too. While I agree with most of you that 95% is risky, for me the key in this offering will be the quality of the borrower, someone that will continue paying even if property prices tank and they are in negative equity. The document refers to 'prime' borrowers with 'clean credit history' so it would be interesting to know the approval criteria. Their loan is granted at the same time as a high street bank which gives the first 85%, which is also a reassurance. I prefer taking a risk on a high LTV on a quality borrower securing his own house, rather than a 75% LTV on a half-built development, or an unsecured loan to an SME I have never heard of. Initially I was not very keen on this one. I did not get good vibes about it, but reading your post, you might have a point. Now I am more confused than before. Need to think more about it. Any more comments for and against please?
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ablender
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Post by ablender on Jan 8, 2016 16:39:28 GMT
I can get 4-5% on my cash from a high street bank current account and /or regular saver after basic rate tax is deducted at source. Do you mind if I ask you for details of these accounts / where?
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alanp
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Post by alanp on Jan 8, 2016 16:44:02 GMT
Hope I am allowed to post external link, apologies if not, happy to edit / remove. Have a look at forums.moneysavingexpert.com/showthread.php?t=5374614 plus the Regular Saver thread linked from it. You need to open the relevant number of single / joint accounts and meet the relevant Ts & Cs for each of them but posters on there reckon you can get (from memory so might be a bit out) ~£50k in as an individual and ~£130k as a couple if you open enough of them although at those numbers you are entering 3% territory.
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Investboy
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Trying to recover from P2P revolution
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Post by Investboy on Jan 8, 2016 17:21:37 GMT
Can someone clarify one thing for me. Why and how this top-up mortgage works? Why can't the borrower just get a mortgage for LTV95 from the bank?
My reasoning: They are prime borrowers, so I guess they can get mortgage for the best rate (4% or less?) for the whole amount. So why to take mortgage for LTV85% for 4% and then top up with another LTV10 for much higher (6.5% + Ablrate fee + Influx fee). How can this be a good deal for the borrower. What am I missing?
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SteveT
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Post by SteveT on Jan 8, 2016 17:27:00 GMT
Can someone clarify one thing for me. Why and how this top-up mortgage works? Why can't the borrower just get a mortgage for LTV95 from the bank? My reasoning: They are prime borrowers, so I guess they can get mortgage for the best rate (4% or less?) for the whole amount. So why to take mortgage for LTV85% for 4% and then top up with another LTV10 for much higher (6.5% + Ablrate fee + Influx fee). How can this be a good deal for the borrower. What am I missing? These days the better rates all require a 15% / 20% / 25% deposit.
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Post by Financial Thing on Jan 8, 2016 17:40:09 GMT
In other news, US Powerball lottery jackpot reaches $800m I'm going online to wangle a ticket and If I win, I'm never p2p lending again Oh and everyone here gets a nice gift.
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blender
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Post by blender on Jan 8, 2016 18:19:58 GMT
In other news, US Powerball lottery jackpot reaches $800m I'm going online to wangle a ticket and If I win, I'm never p2p lending again Oh and everyone here gets a nice gift. I'm here, in case you win. FC has just (you are too late I think) posted a 12 month A+ secured property development loan at 10% (less their 1% of course). I will still have enough cash left for my permitted share of the second Ablrate loan of the year.
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hazellend
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Post by hazellend on Jan 8, 2016 18:35:57 GMT
I'd rather actually just invest in BMV properties with Moose or Property Partner than these loans. Why would a prime borrower need to borrow at these rates when a credit card can do 0% for several years. Seems like subprime - prime to me.
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gt94sss2
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Post by gt94sss2 on Jan 8, 2016 21:02:39 GMT
Like others I am not going to be investing in this loan - even if I didn't think 'Northern Rock' when I read the particulars, the yield doesn't do it for me when compared to other opportunities out there.
What does concern me though is the lack of notice Ablrate gave for this loan going live. I received their email at 12:41 - a whole 4 minutes before the loan went live. That frankly isn't good enough - even Moneything cut it tight but at least they guarantee 4 hours notice and often provide more..
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james
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Post by james on Jan 9, 2016 5:52:11 GMT
Can someone clarify one thing for me. Why and how this top-up mortgage works? Why can't the borrower just get a mortgage for LTV95 from the bank? The mortgage interest rate is charged on the whole balance of the mortgage loan. The interest rate increases as the LTV increases. These loans exploit the difference between 85% and 95% loans, letting the borrower take an 85% loan at its lower interest rate, then take a 10% loan at a higher rate to get to the total desired. Consider an example of a property costing £150,000 with a desire to borrow 95% of that using a five year fixed rate repayment mortgage at a sensible fee level. At 95% LTV, £142,500 borrowed, I see a deal from Furness Building Society for an initial 3.99% rate then 5.54%. Or Tesco 4.49% then 4.24%. At 85% LTV, £127,500 borrowed, I see a deal from Hinckley & Rugby Building society at 2.9% then 5.64%. Or Tesco 2.79% then 4.24%. I'll use the Tesco rates to illustrate. The borrower can pay 4.49% over five years on £142,500 so ignoring repayments (a big approximation!) they would pay £31,991 on their borrowing. Or they can bowwow £127,500 and pay 2.79% on that, a total of £10,671. They would then need to borrow the remaining £15,000 at pay no more than £31,991 - £10,671 = £21,320 in interest over the five years. If they were to use an interest only personal loan they could break even if the loan interest rate was around 28.4%. Considerably higher than that for an amortising personal loan, perhaps double or more, I picked interest only as worse - lowest - case interest rate. So, with a potential loan on the 10% at an interest rate in the 28% sort of range it's easy to see why there is potential for significant improvement in the borrower's position, saving them a lot of interest, and a potential nice profit for the party doing the lending. 28% for good credit rated borrowers in the UK would be rather nice business to have, even better if there is security, however potentially difficult to realise. The questions then move on to why the rates offered via Ablrate are as they are and that will have assorted reasons from the need to Ablrate and the business to make a profit to the alternative rates available to the business. This is a nice interest rate arbitrage opportunity for the business doing the borrowing, not necessarily so nice for potential lenders via Ablrate. Knowing where the loans are will be desirable, to know the condition of the local housing market and hence potential security value. But most of all, wondering about the split of the interest rate saving between the parties is what comes to mind, after the together mortgages that Northern Rock was famed for, which were considerably less attractive, involving unsecured borrowing over 100% LTV, vs these being secured at no more than 95%. First mortgage lenders will presumably treat this as a borrowed deposit so the borrower may well be required to have the money from their own resources to do the initial mortgage borrowing, then use this borrowing to fund home improvements of various sorts. Depends on the specific lender's policy an limits on borrowed deposits. For a residential mortgage there are various restrictions along the way towards repossession that are much more onerous than for the business type of BTL mortgage, involving things like being willing to accept interest only for extended periods if the borrower has possibly temporary financial difficulties, because a judge would not be particularly likely to grant a possession order for a temporary-appearing situation. In addition there are the issues relating to possible default on the second mortgage while not defaulting on the first and how the interests of each lender may differ, particularly if full payments are made on the fist mortgage and interest only offered on the second, eliminating any likely desire for the first mortgage holder to repossess and making them a likely opponent to possession attempts in case they were to lose money due to a sale below value.
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