webwiz
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Post by webwiz on Jan 30, 2016 16:07:15 GMT
The platforms paying higher rates of interest are already struggling to meet the demand. As p2p gets more widely known about this situation will only get worse. Once the IFISA comes in, desirable as it is in theory, it will likely be a hammer blow as far as availability of loans is concerned.
The only way to match supply and demand, given that the supply side cannot be influenced, is by reducing interest rates. I propose the following scheme for SS, MT and FS and possibly others. Investors bid a rate (subject to a cap set by the platform) and the loan is filled from the bottom up and the rate paid to all investors is then the highest rate which was successful.
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bigfoot12
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Post by bigfoot12 on Jan 30, 2016 16:33:41 GMT
The platforms paying higher rates of interest are already struggling to meet the demand. As p2p gets more widely known about this situation will only get worse. Once the IFISA comes in, desirable as it is in theory, it will likely be a hammer blow as far as availability of loans is concerned. The only way to match supply and demand, given that the supply side cannot be influenced, is by reducing interest rates. I propose the following scheme for SS, MT and FS and possibly others. Investors bid a rate (subject to a cap set by the platform) and the loan is filled from the bottom up and the rate paid to all investors is then the highest rate which was successful. I think this view is quite mainstream. It is possible that some of the platforms you mention won't be quite as quick to launch an ISA as others and then cash will move elsewhere, but I think that many expect rates to fall in April. Of course this will influence the supply side as loans will become cheaper for the borrower and supply might quickly balance out at a slightly lower rate. Whether or not this rate is worth the risks being taken is another matter. (Lots of things have become a lot cheaper in the last few months.)
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Post by wiseclerk on Jan 30, 2016 16:38:00 GMT
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Post by highlandtiger on Jan 30, 2016 17:21:49 GMT
The platforms paying higher rates of interest are already struggling to meet the demand. As p2p gets more widely known about this situation will only get worse. I think you are looking at this from the wrong angle. You are looking at it from the investors side, not from the P2P's side. The P2P companies do not need to change anything, they are filling up every loan they put out there within hours if not minutes. If they have to half their rates they have to find twice as many loans to make the same profit.
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bigfoot12
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Post by bigfoot12 on Jan 30, 2016 17:45:22 GMT
The platforms paying higher rates of interest are already struggling to meet the demand. As p2p gets more widely known about this situation will only get worse. I think you are looking at this from the wrong angle. You are looking at it from the investors side, not from the P2P's side. The P2P companies do not need to change anything, they are filling up every loan they put out there within hours if not minutes. If they have to half their rates they have to find twice as many loans to make the same profit. No they don't they can keep the same fees and interest margin. In fact they could lower the offering to the investors and keep the borrower paying the same and increase the margin. Or if they keep the interest margin the same but at a lower lender and borrower rate they might easily find twice as many loans, so a much increased profit.
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pikestaff
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Post by pikestaff on Jan 30, 2016 17:45:37 GMT
The platforms paying higher rates of interest are already struggling to meet the demand. As p2p gets more widely known about this situation will only get worse. I think you are looking at this from the wrong angle. You are looking at it from the investors side, not from the P2P's side. The P2P companies do not need to change anything, they are filling up every loan they put out there within hours if not minutes. If they have to half their rates they have to find twice as many loans to make the same profit. Hardly. They make their money on fees, plus the margin between what the borrrower pays and what we get. They will do their level best to maintain their margin, whatever happens to rates.
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ben
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Post by ben on Jan 30, 2016 19:37:59 GMT
I think you are looking at this from the wrong angle. You are looking at it from the investors side, not from the P2P's side. The P2P companies do not need to change anything, they are filling up every loan they put out there within hours if not minutes. If they have to half their rates they have to find twice as many loans to make the same profit. Hardly. They make their money on fees, plus the margin between what the borrrower pays and what we get. They will do their level best to maintain their margin, whatever happens to rates. If they have enough people wanting loans on current term and enough lending why would they change it, if anything they will reduce what they pay the investors so increasing there own profit. As Assetez QAA has shown they can still get money for offering less
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Post by meledor on Jan 30, 2016 21:42:12 GMT
The platforms paying higher rates of interest are already struggling to meet the demand. As p2p gets more widely known about this situation will only get worse. Once the IFISA comes in, desirable as it is in theory, it will likely be a hammer blow as far as availability of loans is concerned. The only way to match supply and demand, given that the supply side cannot be influenced, is by reducing interest rates. I propose the following scheme for SS, MT and FS and possibly others. Investors bid a rate (subject to a cap set by the platform) and the loan is filled from the bottom up and the rate paid to all investors is then the highest rate which was successful.
There's no need or incentive for a platform paying higher rates of interest to try and balance supply and demand by introducing variable rates or auctions whilst it continues to grow. But were an increasing number of loans to go instead to platforms paying lower rates then it would be forced to consider protecting its business by reducing rates.
But it is not just rates but the rate/risk mix that lenders should be concerned about. Are these platforms paying lower rates comparable in terms of the rate/risk mix? I've increasingly read comments from some that SS, for example, is too risky for them as thay expect the property market not to be as benign as it has been over the last few years, in other words the existing rates are too low for the perceived risk, which seems at odds with the view that rates need to be lower.
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registerme
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Post by registerme on Jan 31, 2016 0:40:34 GMT
Excellent stuff, as always  . Does anybody have any thoughts about:- a) how many platforms will introduce IFISAs? b) how much uptake there is likely to be? c) what the difference is in terms of protection eg FSCS availablility between current cash ISAs(?), p2p (none), and IFISAs via p2p(?) d(*)) if there's flow from "traditional" to "innovative" then that reduces supply for "traditional" - in theory rates should rise on the traditional side, particularly given leverage / FRB and capital requirements - note this is me theorising on the back of a packet of fags that I don't smoke any more..... e) the risk / volatility / rate sell is easy, assuming you buy it, if you're talking Z / RS / FC, but perhaps more difficult if you're looking at other platforms, how might this impact things? p2p is still very, very immature. It will likely take decades for its' full impact to be truly understood. One other point that I think needs consideration is to think, simply, about how much capital the sector can absorb. A friend of mine manages a £3b SWF equity fund. I've tried to get her interested in the sector and yet anything less than £100m she's not even interested in thinking about. Walls of pension / insurance / hedge / >>ISA<< money are simply not going to have many places to go. Even the Zs / RSs/ FCs would struggle to deploy those kinds of funds. We might be a few years away from p2p being mature enough, and large enough, to actually be able to consume "walls" of money..... * One thing I am interested in, and have found difficult to explore or investigate, is whether or not p2p adds to the amount of overall (available?) credit, or simply replaces more expensive current (available?) credit..... Either way, is it healthy?
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sqh
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Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Jan 31, 2016 1:10:10 GMT
I think the rates of small loans may fall, but I expect the rates offered for large loans to be maintained. If P2P platforms can offer ever larger loans then everyone should be happy. Currently, I'm aware of three £5m+ loans planned to drawdown soon. They have first charge LTV's of 58%,65% & 67% all offering 12%.
The supply of ISA money will allow even bigger projects to be financed.
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webwiz
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Post by webwiz on Jan 31, 2016 17:32:15 GMT
I think the rates of small loans may fall, but I expect the rates offered for large loans to be maintained. If P2P platforms can offer ever larger loans then everyone should be happy. Currently, I'm aware of three £5m+ loans planned to drawdown soon. They have first charge LTV's of 58%,65% & 67% all offering 12%. The supply of ISA money will allow even bigger projects to be financed. The bigger the loan the larger the amount of interest to be paid by the borrower. A developer looking to make a nice profit due to a favourable planning decision may be prepared to pay 12% for a few months rather than take on the hassle with traditional lenders. But larger projects will normally take longer to complete so the interest bill will be even larger. Also the borrowing overheads (valuation & legal fees etc) which are relatively high for small loans are chicken feed for large loans. Consequently I see a ceiling for p2p loans of just a few million. I would seriously question why a borrower would be prepared to pay hundreds of thousands of pounds in "excess" interest just for the advantages of a quick decision, less bureaucracy etc offered by p2p compared to banks.
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locutus
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Post by locutus on Jan 31, 2016 22:12:47 GMT
I think the rates of small loans may fall, but I expect the rates offered for large loans to be maintained. If P2P platforms can offer ever larger loans then everyone should be happy. Currently, I'm aware of three £5m+ loans planned to drawdown soon. They have first charge LTV's of 58%,65% & 67% all offering 12%. The supply of ISA money will allow even bigger projects to be financed. The bigger the loan the larger the amount of interest to be paid by the borrower. A developer looking to make a nice profit due to a favourable planning decision may be prepared to pay 12% for a few months rather than take on the hassle with traditional lenders. But larger projects will normally take longer to complete so the interest bill will be even larger. Also the borrowing overheads (valuation & legal fees etc) which are relatively high for small loans are chicken feed for large loans. Consequently I see a ceiling for p2p loans of just a few million. I would seriously question why a borrower would be prepared to pay hundreds of thousands of pounds in "excess" interest just for the advantages of a quick decision, less bureaucracy etc offered by p2p compared to banks. A quick decision can be the difference between capitalising on an opportunity and missing it completely.
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