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Post by ruralres66 on Oct 14, 2016 10:54:05 GMT
Initially, a year ago, I placed £10,000 in the 5 year July 2015.
On 8th August 2016 I did a "£5000" sell out. ( trying to find the fee detail and assignment info)
(There have been some repayments early too I believe.)
I have scrutinised the RS "Transaction" page but it does not give any detail about the market which the "sellout" has come from, or differentiate between contract repayments, sellouts or respective markets for either. The spreadsheet references this and has a field but shows no information.
I have rung RS and requested that this info can be placed on the spread sheet. RS can give this info to me but it should be available on the spreadsheet.
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am
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Post by am on Oct 14, 2016 11:39:29 GMT
I have just tested a full withdrawal on the 5 year market and it was calculated thus; * £7600 withdrawn @ 5.5% weighted average (today, 5 year is displaying 5.5% as rate) * Fee £72 plus £16 assignment fee. Earliest loan was July 2015, majority though, during the time since, mainly 2016. Most of my lending was in the now defunct 3 year, some in 1 year and "monthly" now "rolling". So your saying that after say an average of 6 months holding 5 year loans paying 5.5% you could sell the lot for less than 1%. Thus earning 4.5% for the time you held the loans. Anyone else able to confirm this as if so it's obviously the way to go for everyone! Your arithmetic is wrong. The interest on 5 year loans held for 6 months is ~2.75%; the exit fee is ~1.1%, so that's ~1.65% earned (APR ~ 3.3%, which was approximately the rolling loan rate before the recent falls.). Your premises may also be wrong. The existence of an assignment fee suggests that the loans were paying less than the current going rate. And "mainly 2016" suggests that the average duration of less than 6 months - certainly there's enough relative uncertainty in the average length held that drawing conclusions on an assumed 6 month average duration is unsafe. But since the rate earned is approximately the rolling rate they may be close enough for government work, and it's the arithmetic error that is leading you astray.
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am
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Post by am on Oct 14, 2016 13:10:50 GMT
Hi, My intention is certainly not to mislead investors. Admittedly I have not used the sell out feature on RateSetter, however, the RateSetter site does state. 'On average, replacements are matched within 10 minutes, and the average Sell Out fee is 0.72%'Can you explain why you are experiencing a different fee than that reported by RateSetter? I'll speak to RateSetter about this as well to gain a better understanding. cheers, Iain I took a quick look. My sellout fee for what I have left in the 5yr would be around 8%. It depends what rates your loans are, most of my 5yr loans are 7-8% (initiated a while back). I imagine for the bulk of lenders who have loans around 5-6%, the sellout fees are much closer to 0.72% because there's very little difference between the rates (and apparently rate differential is what drives the sellout fee). Currently it's the rate differential between markets that drives the sellout fee, not the temporal rate differential within a market. The reason that your sellout fee is higher is that you've held your loans longer. Falls in the generally prevailing interest rate does not affect the sellout fee. A rise in the generally prevailing interest rate does; if your loans were at 4-5% you'd be looking at a hefty assignment fee. (I was going to say around 20%, but that only holds for loans of infinite duration - the actual number is lower, but I don't know off hand how to calculate it. You have to offer a sufficient discount on the capital to make to rate to redemption equal to the generally prevailing interest rates.)
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Investboy
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Trying to recover from P2P revolution
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Post by Investboy on Oct 14, 2016 15:24:35 GMT
I just did a sellout experiment with my account: Term
| Fee [%] | Avg rate [%] | 1yr | 0.91 | 4.6 | 3yr | 2.59 | 5.5 | 5yr | 2.69 | 6.4 |
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am
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Post by am on Oct 14, 2016 15:36:38 GMT
Currently it's the rate differential between markets that drives the sellout fee, not the temporal rate differential within a market. The reason that your sellout fee is higher is that you've held your loans longer. Falls in the generally prevailing interest rate does not affect the sellout fee. A rise in the generally prevailing interest rate does; if your loans were at 4-5% you'd be looking at a hefty assignment fee. (I was going to say around 20%, but that only holds for loans of infinite duration - the actual number is lower, but I don't know off hand how to calculate it. You have to offer a sufficient discount on the capital to make to rate to redemption equal to the generally prevailing interest rates.) Rates have fallen, which probably explains my £0.01 assignment fee. My fee breakdown then details two amounts: #1 - Gross interest already earned on contracts to be sold (this seems clear, interest I have earnt and received) #2 - Gross interest you would have earned over period And my sellout fee is #1-#2. So it does appear to involve rate differential over time, and current market rates. I don't really see how #2 is calculated though, is that some simulated interest as if I had earned current market rates, and my loan pieces that have 1month to run get rolling rates, pieces that have 1yr to run get 1yr rates and over 1yr get some blend of 1yr and 5yr? How #2 is calculated is opaque. What I understood (and which makes sense) is that pieces less than a year old get the rolling rate, and pieces over a year old get the 1 year rate (and at least until recently pieces over 3 years old got the 3 year rate - resulting in an anomaly of a sellout fee that is significantly less at 3 years and 1 day that at 2 years and 364 days). I don't think we've ever seen an explanation as to how the rolling and 1 year rates used in the calculation are determined, and given the significant diurnal variation in rates this is a source of uncertainty about the size of sellout fees. I'm also uncertain whether interest is clawed back on the basis of the interest paid on the remaining capital, or on the basis of all interest paid to date on the loan - the latter gives a larger sellout fee - so there's even some uncertainty about #1. (I've tended to assume that former, but other people have suggested that the latter is the case.)
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Neil_P2PBlog
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Post by Neil_P2PBlog on Oct 14, 2016 15:45:26 GMT
To add to the sell out analysis:
I bought 5 year in one chunk @6.1 in mid July 2016 (exactly 3 months ago)
Rate to lend 5 year right now is 5.5% Rate to lend rolling right now is 2.4%
My sell out fee comes to 0.815%
((6.1% / 4) - 0.815) * 4 = 2.84%
So surprisingly in my case I appear to be slightly better off buying in 5 year and selling out.
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am
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Post by am on Oct 14, 2016 16:02:43 GMT
To add to the sell out analysis: I bought 5 year in one chunk @6.1 in mid July 2016 (exactly 3 months ago) Rate to lend 5 year right now is 5.5% Rate to lend rolling right now is 2.4% My sell out fee comes to 0.815% ((6.1% / 4) - 0.815) * 4 = 2.84% So surprisingly in my case I am slightly better off buying in 5 year and selling out. Rates in the rolling market have been falling, but you could get more that 2.4% today - I'd guess 3.0% or 3.1% (lend now was 2.8% when I looked earlier today). (I've just pulled some money out because reinvestment at 3.3% has stopped working.) If my memory serves me correctly you could have got more than 3% 3 months ago. So, I suspect that you are worse off buying in 5 year and selling out.
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am
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Post by am on Oct 14, 2016 20:48:05 GMT
Re #2, my sellout quote seemed to be static even as the last matched rates changed. This is over a period of 5-6hrs. Maybe it uses the market rate. I wouldn't be surprised if that (using the market rate) was the case. But a while back they changed how the market rate was calculated; if the sellout calculation was based on the market rate that would have been a change to the sellout fees, and I don't recall any announcement was made to that effect, so perhaps it's not based on the market rate. (Another possibility is one of the daily mean rates. Or a rolling n-day mean.)
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jnm21
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Post by jnm21 on Oct 16, 2016 19:24:39 GMT
I've read here that RS won't let you sell out if the fee exceeds 100%
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Post by Deleted on Oct 16, 2016 20:25:43 GMT
Orca's estimate of the early exit fee is way out ... 0.72%, I wish. Current rates for selling out of 18 month old loans : 3 year - 4.6%, 5 Year - 4.7%. There is no assignment fee, as rates were higher when these loans were made.
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jnm21
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Post by jnm21 on Oct 16, 2016 20:33:54 GMT
I took a quick look. My sellout fee for what I have left in the 5yr would be around 8%. It depends what rates your loans are, most of my 5yr loans are 7-8% (initiated a while back). I imagine for the bulk of lenders who have loans around 5-6%, the sellout fees are much closer to 0.72% because there's very little difference between the rates (and apparently rate differential is what drives the sellout fee). Very approximately (hopefully handling compounding & reducing amount roughly correctly), if I lend £100 at 5% on the 5 year market & sell out after 1 year, by my reckoning I would be getting £1.89 per month, so after 1 year the payments outstanding would be £90.18 (48 by £1.89 less what would be a small overpayment), but the amount owed would be £81.80 - are folk comparing the sell out value to to the actual amount owed or the amount that would be repaid if the loan ran to term? My understanding is that when RS say what you would have earned they mean in the time the money is actually lent at the rate of the loan (though it is not clear) & I may have been mislead by my only sell out quote being early in loan.
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Post by Iain - Orca on Oct 17, 2016 8:30:55 GMT
Is this right? I would have expected to see maximum there. On the other hand the review says that the LTV across the property book is 84%. Hi, This was a typo. I've now updated. Thanks for the heads up.
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Post by Iain - Orca on Oct 17, 2016 8:48:11 GMT
Hi All,
Thanks for your comments. It's really appreciated.
I had taken the average 0.72% reported by RateSetter without conducting sufficient DD on this figure.
It's now clear that the sell out fee is largely dependent on the difference between the markets (term) and the updated rates.
I think 'Shirehore' summarised this well.
'Currently it's the rate differential between markets that drives the sellout fee, not the temporal rate differential within a market.
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I've now updated the blog to reflect your comments. It's difficult to know how RateSetter landed on the 0.72% figure, however, I have asked the question. If I get an appropriate answer, I'll get back to you.
Thanks,
Iain
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Post by Iain - Orca on Oct 17, 2016 9:00:50 GMT
Another figure which I would like to get to the bottom of is the net returns reported by the platform.
The static loan book simply isnt enough to calculate this figure and verify what RateSetter are reporting.
I had thought of an idea to calculate this figure by taking all the past loan books and creating a monthly cashflow for each loan. Has anyone been collecting the loan books and wish to share?
Any other methodology for calculating this figure would be appreciated.
Thanks,
Iain
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Post by propman on Oct 17, 2016 11:38:06 GMT
Another figure which I would like to get to the bottom of is the net returns reported by the platform. The static loan book simply isnt enough to calculate this figure and verify what RateSetter are reporting. I had thought of an idea to calculate this figure by taking all the past loan books and creating a monthly cashflow for each loan. Has anyone been collecting the loan books and wish to share? Any other methodology for calculating this figure would be appreciated. Thanks, Iain Is this available? The last time I looked the only loanbook released was for 30/4/2016.
I'd be interested if other more recent info was available.
- PM
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