SteveT
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Post by SteveT on Sept 22, 2016 14:09:48 GMT
How would you have divided your Birkenhead lending if supply had NOT been constrained?
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stevio
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Post by stevio on Sept 22, 2016 21:06:45 GMT
Personally, I would have preferred a less complex 12℅ loan where I don't have to do any complex math to work out the risk
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archie
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Post by archie on Sept 23, 2016 6:45:20 GMT
Personally, I would have preferred a less complex 12℅ loan where I don't have to do any complex math to work out the risk It would have been 11%, if you invested the maximum in both tranches that's the return.
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SteveT
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Post by SteveT on Sept 23, 2016 7:02:28 GMT
Well my conclusion (after 55 votes) is that MoneyThing and bengilbert must have got the balance of risk and reward about right, the top 3 options being 100% B, 50%/50% and 100% A with a sprinkling in between. There's a skew towards the higher risk B tranche but my guess is that's because: a) regular forum members are mostly experienced P2P lenders so perhaps willing to take on a bit more risk, not least because ... b) there is the option of reducing exposure to tranche B over the term via the SM Definitely looks to be a worthwhile route to consider for some of the future BPF loans. |
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Maestro
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Post by Maestro on Sept 23, 2016 8:55:27 GMT
Well my conclusion (after 55 votes) is that MoneyThing and bengilbert must have got the balance of risk and reward about right, the top 3 options being 100% B, 50%/50% and 100% A with a sprinkling in between. There's a skew towards the higher risk B tranche but my guess is that's because: a) regular forum members are mostly experienced P2P lenders so perhaps willing to take on a bit more risk, not least because ... b) there is the option of reducing exposure to tranche B over the term via the SM Definitely looks to be a worthwhile route to consider for some of the future BPF loans. I agree. This A/B structure also has a positive (from MTs perspective) side effect of increasing lender demand I believe. I am inclined to invest more in A than my usual amount if it was a single tranch, and I am sure my neighbour who has higher risk tolerance than me is inclined to invest more than usual in tranch B because he likes higher interest rate, so overall higher demand. I like x% LTV when there is real money junior than me, rather than a number made up by a valuer. I wish savingstream did the same, and provided loans with two tranches, I would certainly be investing more and more willing to hold till maturity. But I understand that this has the potential to complicate matters for some people who likes the simplicity of 12%.
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j
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Post by j on Sept 23, 2016 9:38:52 GMT
Well my conclusion (after 55 votes) is that MoneyThing and bengilbert must have got the balance of risk and reward about right, the top 3 options being 100% B, 50%/50% and 100% A with a sprinkling in between. There's a skew towards the higher risk B tranche but my guess is that's because: a) regular forum members are mostly experienced P2P lenders so perhaps willing to take on a bit more risk, not least because ... b) there is the option of reducing exposure to tranche B over the term via the SM Definitely looks to be a worthwhile route to consider for some of the future BPF loans. You've got it exactly on the dot SteveT. The fact that you can sell easily (atm) on the SM is a major factor for most to go for 13%. If the SM isn't as liquid as it currently is, the balance will not be so much in favour of B, imho.
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james
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Post by james on Sept 23, 2016 9:50:33 GMT
Well my conclusion (after 55 votes) is that MoneyThing and bengilbert must have got the balance of risk and reward about right, the top 3 options being 100% B, 50%/50% and 100% A After 66 votes and looking at the top 3 only I see around twice the demand for the 13% tranche as the 10% one assuming vote counts correlate with amounts to invest. Of course the interest rate structure wouldn't support that split. 10%: 11 + 50% of 12 = 17 13%: 24 + 50% of 12 = 30 It looks as though a 10%:12% split would be a better match for the demand, delivering more of the more in demand portion than 13%. Whether that's sufficient compensation for the first loss position is an interesting question and I wonder how 9%:12% with a good deal more at 12% and the resulting even better loss protection for the 9% portion but also reduced loss potential to the 12% portion (more depth of loss needed to take it all) would have fared. What's perhaps more interesting is how many wouldn't have participated at all had it been 11% only. I'd probably be one of those.
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archie
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Post by archie on Sept 23, 2016 10:02:29 GMT
Just for reference on LI the B tranche is always an extra 1% over the A tranche.
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Steerpike
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Post by Steerpike on Sept 23, 2016 10:23:31 GMT
Just for reference on LI the B tranche is always an extra 1% over the A tranche. Much lower rates of course, typically 6% A and 7% B give or take a percent.
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mikeh
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Post by mikeh on Sept 23, 2016 11:19:25 GMT
Just for reference on LI the B tranche is always an extra 1% over the A tranche. . Which begs the question Why? Are BPF's loans really that much riskier than LI's or is it just the size of the loans?
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Steerpike
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Post by Steerpike on Sept 23, 2016 11:40:42 GMT
Much lower rates of course, typically 6% A and 7% B give or take a percent. Which begs the question Why? Are BPF's loans really that much riskier than LI's or is it just the size of the loans? LI loans are generally considered lower risk, for example there is a current loan on a commercial property of £700k over 11 months at 6.5% with 50% LTV. I think that LI rates are usually about 12% to the borrower rather than the 18% (?) on the BPF loans. Oh, and of course LI are too big to fail...
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Post by bengilbert on Sept 23, 2016 12:08:55 GMT
Which begs the question Why? Are BPF's loans really that much riskier than LI's or is it just the size of the loans? LI loans are generally considered lower risk, for example there is a current loan on a commercial property of £700k over 11 months at 6.5% with 50% LTV. I think that LI rates are usually about 12% to the borrower rather than the 18% (?) on the BPF loans. Oh, and of course LI are too big to fail... Just a point of information - the great majority of our borrowers are paying well under 18% pa.
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pom
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Post by pom on Sept 23, 2016 12:45:30 GMT
LI loans are generally considered lower risk, for example there is a current loan on a commercial property of £700k over 11 months at 6.5% with 50% LTV. I think that LI rates are usually about 12% to the borrower rather than the 18% (?) on the BPF loans. Oh, and of course LI are too big to fail... Just a point of information - the great majority of our borrowers are paying well under 18% pa. Nice to know! Tallies with a few conclusions I'd already formed about the supposedly similar rates being offered on certain platforms...
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huxs
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Post by huxs on Sept 23, 2016 13:34:13 GMT
I wonder how many people who are voting for 100% Tranche B actually intend to hold to term or will be selling out way before that v's the ones 100% in Tranche A. Also if / when the first one of these split tranches loans takes a loss how popular will the Tranche B's become.
Gross simplification I know but:
Last 3% interest = 23% LTV or 1% interest = 7.6% LTV
First 10% is 1% Interest = 4.6% LTV
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archie
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Post by archie on Sept 23, 2016 13:42:28 GMT
I wonder how many people who are voting for 100% Tranche B actually intend to hold to term or will be selling out way before that v's the ones 100% in Tranche A. Also if / when the first one of these split tranches loans takes a loss how popular will the Tranche B's become.
Gross simplification I know but:
Last 3% interest = 23% LTV or 1% interest = 7.6% LTV
First 10% is 1% Interest = 4.6% LTV I voted 100% B and will hold to term, probably pickup some more on the sm when available. 
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