jw01
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Post by jw01 on Jul 7, 2016 22:36:17 GMT
I haven't been watching closely, but what's the highest 5 year rate anyone has seen recently? I saw 6.1% today which got me all hot and bothered but it dropped again. I have been hanging on for 6.4% (as I see have others) and haven't reinvested anything for weeks. Another platform says that a 0.1% difference equates to a wait of 30 days on a 5 year loan. I haven't seen the maths for that.
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oldgrumpy
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Post by oldgrumpy on Jul 7, 2016 22:55:58 GMT
I got a bit of 6.2% late last week, but have had to be satisfied with 6.1% most of the time in the last fortnight, never had to wait more than a couple of days. Most of the auto-investors/market rate/lend-right-now have been getting 5.5%-5.9%, occasionally less.
I suspect that if you relist at 6.1% there is a good chance it will be lent out late tonight.
Disclaimer: this is not advice, it's just a grumpyhunch.
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alender
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Post by alender on Jul 8, 2016 1:05:40 GMT
Another platform says that a 0.1% difference equates to a wait of 30 days on a 5 year loan. I haven't seen the maths for that. 30 days is about right. As a very rough rule of thumb the average number of months the money is lent out is about the number of days it is worth waiting for an extra 0.1%. So for a 5 year amortising loan repaying once a month the average time money is leant is half the loan plus one month i.e. 31 months. Using this rule of thumb you get 30 days it is 0.1% per day. 1 year loan (non amortising) 0.1% per 12 days 3 year loan (amortising) 0.1% per 19 days 5 year loan (amortising) 0.1% per 31 days It must be stressed these are not accurate but give a reasonable indication of how long to wait for a match to gain additional interest. Another consideration is that while money is waiting in a queue it can be pulled out at any time if something bad happens and I believe it is a lot safer then when on loan.
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Post by westonkevRS on Jul 8, 2016 6:59:45 GMT
I hate to say it @lender, but I think your analysis is mathematically wrong. I'd always worked to the 17 day rule for 5 years and so 31 days seemed to long.
What it ignores is the base rate of interest, as a ratio to the additional 0.1% you are trying to attain.
As an extreme example to prove the point, if the lender rate over 5 years was 50%, AER then waiting 31 days to gain 0.1% wouldn't make sense. 31 days waiting is 3% of the 31-months, so you would lose 1.5% AER of the 50% AER base lender interest trying to get the extra 0.1%.
Kevin.
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pikestaff
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Post by pikestaff on Jul 8, 2016 7:14:14 GMT
Another platform says that a 0.1% difference equates to a wait of 30 days on a 5 year loan. I haven't seen the maths for that. 30 days is about right. As a very rough rule of thumb the average number of months the money is lent out is about the number of days it is worth waiting for an extra 0.1%. So for a 5 year amortising loan repaying once a month the average time money is leant is half the loan plus one month i.e. 31 months. Using this rule of thumb you get 30 days it is 0.1% per day. 1 year loan (non amortising) 0.1% per 12 days 3 year loan (amortising) 0.1% per 19 days 5 year loan (amortising) 0.1% per 31 days It must be stressed these are not accurate but give a reasonable indication of how long to wait for a match to gain additional interest. Another consideration is that while money is waiting in a queue it can be pulled out at any time if something bad happens and I believe it is a lot safer then when on loan. I reckon breakeven on a 5 year loan is about 14 days per 0.1%, less if you allow for prepayments. See spreadsheet attached, E&OE.Edit: Crossed with westonkevRS .
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alender
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Post by alender on Jul 8, 2016 8:52:54 GMT
I hate to say it @lender, but I think your analysis is mathematically wrong. I'd always worked to the 17 day rule for 5 years and so 31 days seemed to long. What it ignores is the base rate of interest, as a ratio to the additional 0.1% you are trying to attain. As an extreme example to prove the point, if the lender rate over 5 years was 50%, AER then waiting 31 days to gain 0.1% wouldn't make sense. 31 days waiting is 3% of the 31-months, so you would lose 1.5% AER of the 50% AER base lender interest trying to get the extra 0.1%. Kevin. I hate to admit it but you are right and your maths are better than mine, I forgot to divide by 2 the number of days for the longer length loans (1 year or more). 30 days it is 0.1% per day. 1 year loan (non amortising) 0.1% per 6 days 3 year loan (amortising) 0.1% per 10 days 5 year loan (amortising) 0.1% per 16 days Again it must be stressed these are not accurate (hopefully better than my last set) but a quick rule of thumb and will alter slightly depending on the interest rate.
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Post by graham34 on Jul 9, 2016 12:39:35 GMT
You also need to factor in early repayments by borrowers or the provision fund. Over the past 6-9 month the 5 year market has been less than a 3 year one for my portfolio.
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Post by westonkevRS on Jul 9, 2016 14:01:18 GMT
The spreadhseet from pikestaff looks impressive, and the result of 14 days feels instinctively right. I'm going to share this with Finance, see if our excel bods agree. My own simplistic maths is that 0.1% extra AER on 6.0% AER over 5 years represents a percentage increase on return of just 1.67%. Using the average squared balance of a 5-year amortising loan as 31 months this is around 946 days. Multiplying 946 days by 1.67% gives 15.8 days worth of extra interest. Taking into account some early repayments, the reducing return gives a finger in the air of 14 days. Hence why I'm tempted to think the statistical spreadhseet approach from pikestaff is correct. That said, if you wait 14 days and the markets go lower and you either have to go elsewhere or accept a lower AER return, then it was a poor decision. But that be the game we love! Kevin. .
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trevor
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Post by trevor on Jul 9, 2016 14:31:44 GMT
I have had my 5 year reinvestment rate set at 6.1 for a few months and redeemed money has never remained uninvested for more than a few days.
As I write this the "rate to lend right now" is 5.5 but there is just £4.9k in 5.7 and £1.7k in 5.9 and £73.1 in 6.0. I'm sticking with 6.1.
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oldgrumpy
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Post by oldgrumpy on Jul 9, 2016 15:23:35 GMT
My feeling of apoplectic ecstasy when I held out for a couple of days at a time recently to get 6.1% (6.2% once) was not just that I had "beaten" the mainstream "market rate" of 5.7%-6.0%, but that I had not succumbed to the temptation to adopt "lend right now" and join the race to the front of the Q (4.8% to about 5.6%).
I aim to beat MR (which is influenced a point or two lower by those lenders-in-a-hurry) by 0.2%-0.3% and to do that takes a daily check up on trends.
Grumples's Gambit = DO NOT EXPECT TO LEND MONEY IN THE MORNING OR EARLY-MID AFTERNOON.
On weekdays, check the total "borrowers offers" piled up by around 6pm*. Check the totals of lenders offers also listed at 6pm*. Place your bets at the rate 0.1% below the rate which would be eaten into to see off all those borrowers (it is RS who set these offers on already approved loans, not the borrowers). If there isn't much in that rate offer, you could take a chance on not dropping by the 0.1%.... works sometimes.
I rarely wait more than 36 hours to lend, except at at beginning of the week and/or the first week of a month. If an "event" (like RS special offers) sends rates down 0.5% or more - pull out and wait a while. I see now "lend right now " is 5.5%, most recent match is 6.0% ... the big lend-out last night was 6.1% (not quite sure if it tickled 6.2%). I think folks at the back of the 6.1% Q might have to wait until Monday or Tuesday - those nearer the front might be lucky by Sunday (unless some numpty slams in £50K at 5.4%).
* or another early to mid evening time.
edit Monday morning: well some numpty must have dropped in cash at around 5% overnight because the RS machine has "found" a "borrower" who only wants to pay 4.8% for his £20K+ loan ..... some matches have been made up to market rate of 5.9%, clearing the till out of lower offers, but RS have left the "offer" on so sucking in inadvertent "suckers" to lend at 4.8%. Not far off unfair practice (if not actually "sharp").
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Post by GSV3MIaC on Jul 9, 2016 19:42:48 GMT
/mod hat off.
I like your approach OG, but I must say that with all the 'up in the air'-ness around at the moment, I'm not sure I want to be sticking momey away for 5 years (at a fixed rate), even though (as someone said) it mostly turns out to be 4 weeks (if rates fall a lot) to 3 years (if they don't, but borrowers get richer).
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oldgrumpy
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Post by oldgrumpy on Jul 9, 2016 22:14:30 GMT
Yep! At just over 6% it's distinctly borderline, but as I'm online anyway it doesn't take much time.
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mark123
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Post by mark123 on Jul 10, 2016 7:58:40 GMT
Five year rates have dropped in the last few months ... in April I could get 6.5%; now I have to hold out to get 6.1%. If the economy does a brexit plummet, I guess the taxpayer will push more liquidity into the banking system and rates could drop further. The same brexit plummet could increase defaults, so the risk goes up as rates go down. The FTSE 100 hasn't grown in 20 years and I'm out. Potential bubble in commercial and residential property waiting to burst. Bond rates aren't worth the effort. Now putting P2P on hold. So, for the first time ever, I've got my retirement pot in a building society at 1%. Which won't be enough to cover a potential round of inflation kicked off by the dropping pound. Living in "interesting times"
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agent69
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Post by agent69 on Jul 10, 2016 8:51:08 GMT
The FTSE 100 hasn't grown in 20 years and I'm out. 20 years ago (July 1996) the FTSE 100 was below 4000. Even if you take the peak in 2000 fund values would have risen if dividends were reinvested. Invest in the 250 and things would have been even better. I do however share your views of a potential property blip, and I am in the process of selling off my SS assets (although 58 and 60 are proving a bit reluctant to move). You've only got to look at the Leeds loan on AC to see what can happen to property values, and I don't think that 70% LTV on SS is going to get the job done. Given the dearth of opportunities on AC it looks like my SS money will have to go into RS.
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Post by westonkevRS on Jul 10, 2016 9:55:47 GMT
....I've got my retirement pot in a building society at 1%. Which won't be enough to cover a potential round of inflation kicked off by the dropping pound. This is the point, people can run for safety. But today safety means an almost guaranteed loss after inflation. P2P certainly brings risk, and the potential return has to be judged individually on their own risk appetite. Me personally, I don't touch the 12% AER plus sites. Funding Knight and large defaults elshwhere should be a warning sign. But RateSetter has delivered on it's promise for over 5 years. I get annoyed when lenders run for the hills at the first worry or blip, it's a lack of loyalty and trust. But either way, we plan to put our head down and carry on delivering, longevity is the best way to build trust. Kevin.
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