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Post by yorkshireman on Jul 14, 2014 8:29:01 GMT
A further thought:
Why would anyone other than flippers lend on some of the other P2P sites, including FC, when no security is offered and the rate to lenders is not commensurate to the risk?
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Post by davee39 on Jul 14, 2014 8:47:58 GMT
Could I ask why lenders are happy to take much lower rates on other platforms that are relatively unsecured, but on AC where there is security there are questions about rates being low? To expand that question. Other than for diversification, why are lenders happy to lend at just over 6% for 5 years or under 5% for 3 years on Ratesetter when AC offer more transparent security for shorter terms or even FC’s property loans at 7-8% for 12/18 months with first charge security?
Yes, I’ve been critical of AC and pilloried FC but I’m mystified by the preference for RS.
Ratesetter offers completely transparent security. If a borrower defaults the '100% fund' makes the payment, and the saver never even notices. Property is only security if can be sold for more than the loan value. This cannot be 100% guaranteed within a reasonable timescale - just ask the Irish Banks, HBOS etc. I have absolutely no complaints about AC as a non investor, however I am happy that the lower returns on other platforms fall better within my appetite for risk. I do dabble in FC, because at present the secondary market allows strategies aimed at maximizing returns while minimizing risk - I have never failed to sell a non property loan at par after reaping a few months interest.
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Post by andrewholgate on Jul 14, 2014 8:51:13 GMT
Some interesting points. I am tracking but can't respond fully as I'm sorting another case today.
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bigfoot12
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Post by bigfoot12 on Jul 14, 2014 9:48:44 GMT
AC makes up a significant part of my P2P portfolio, but so does RS. My recent loans on RS average 6.7-6.8%. I spend about 1 minute per week managing my RS account. There are very few periods on RS when my money isn't earning interest. The lending isn't secure, but with the provision fund it is close. Whilst the provision fund survives my returns will be very close to my lending rate.
I am concerned about platform risk and so even if one of AC or RS could be shown to be much better than the other I would have money with both (and others). However I haven't made a new loan on FC or Zopa for a long time and I am withdrawing repayments. Zopa has rates that are too low, and FC is too time consuming for the risk. (I have been lucky on FC and have no losses so far, although one of my 250 loans looks like it will be.)
If one includes drawdown times and assumes that there will be some defaults with losses then AC rates aren't that much higher than RS rates. 10% for six months drops to about 7.6% if there is a two month delay at 0%! I'm not sure I can do much with a capital loss so the tax impact of AC vs RS is significant for me (assuming some losses).
AC is time consuming. There are some loans on your platform I don't want to be part of. This means I do have to spend time reading some of the documentation. I want to earn more for doing that.
AC has been going for about a year, RS is 4 years old. I don't make much of an allowance for that but I do make some. If you look at the premium over the bank rate Zopa paid savers for the last nine years, it has been on a downward trend.
Let me repeat that AC is one of my largest P2P investments. As AC continues to develop in a way which suits me I will continue to increase my investments. I am close to my comfort zone with property inside the M25, and with investments like London R****l I will use default assumptions learned from painful experiences elsewhere rather than AC's excellent track record. (And at that rate I am not interested because I don't understand designer retail.) But as other opportunities appear on your website I will consider them carefully.
I expect that you will get quite a few deposits over the next few days as **** repays its previous loans.
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Post by yorkshireman on Jul 14, 2014 10:22:18 GMT
To expand that question. Other than for diversification, why are lenders happy to lend at just over 6% for 5 years or under 5% for 3 years on Ratesetter when AC offer more transparent security for shorter terms or even FC’s property loans at 7-8% for 12/18 months with first charge security?
Yes, I’ve been critical of AC and pilloried FC but I’m mystified by the preference for RS.
I agree that RS appears to offer reasonable security in the P2P scenario, however and I’ve said this before, I’m not impressed by the rates. When they eventually return to 6%+ for 3 years and 7.5%+ for 5 years I will take another look at RS.
Until then I prefer to continue down the secured property route disposing of the loans when I see an opportunity and eventual complete exit as I believe that the property market is heading for a medium term collapse which will make the 2008 to 2013 falls pale into insignificance.
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mikes1531
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Post by mikes1531 on Jul 14, 2014 12:01:42 GMT
AC is time consuming. There are some loans on your platform I don't want to be part of. This means I do have to spend time reading some of the documentation. I want to earn more for doing that. This may be a significant overlooked factor. Z and RS lenders invest their money, set their reinvestment controls, and then can ignore their investment and go on holiday. AC requires a fair amount of attention and involvement, so lenders will want to see AC returns that are significantly higher so as to justify the extra effort required. If AC's upcoming revamp addresses this issue -- along with the dead time waiting for loans to draw down -- then it will be a step in the right direction.
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Investor
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Post by Investor on Jul 14, 2014 12:27:21 GMT
I agree that RS appears to offer reasonable security in the P2P scenario, however and I’ve said this before, I’m not impressed by the rates. When they eventually return to 6%+ for 3 years and 7.5%+ for 5 years I will take another look at RS.
Until then I prefer to continue down the secured property route disposing of the loans when I see an opportunity and eventual complete exit as I believe that the property market is heading for a medium term collapse which will make the 2008 to 2013 falls pale into insignificance.
Interested in your thoughts on the 'medium term collapse'. Is this based on when Carney eventually pushes the button on interest rate rises, with many squeezed incomes unable to support the increase or the 1.3m people with significant shortfalls on interest only or failing endowment policy based mortgages that come to term between now and 2020, with a significant number of those properties then flooding the market or the gradual increase in Loan to Income which is now pushing 12% at 4.5x or above LTI or do you have other thoughts as to why you anticipate a medium term collapse/re-aligned of house prices. Thoughts much appreciated
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Post by chielamangus on Jul 14, 2014 13:34:15 GMT
And as an addendum, not all of us chase the highest rates. I think of the poor b*******s that have to pay the interest and all the various fees - I don't want to be part of a consortium that screws the last penny out of 'em - which also adds to my risk. So I eschew very high interest loans and avoid sites which are just pawnshops. Which is not to say that I won't jump in at 12 per cent as a marginal investor when the average is 8.
I also avoid the wind energy sector. I don't like them despoiling the environment, they are extremely inefficient at providing energy and only exist because government is taking money from all electricity consumers (including the poor) to give to the firms that have the money and know-how to erect them. And of course, lucky landowners get ridiculous payments for their leases. I'll not support regressive policies. And please don't anyone come in at this point and talk about saving the planet!
So, we're not all profit maximisers, and we invest with different goals in mind.
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Post by yorkshireman on Jul 14, 2014 14:25:21 GMT
I agree that RS appears to offer reasonable security in the P2P scenario, however and I’ve said this before, I’m not impressed by the rates. When they eventually return to 6%+ for 3 years and 7.5%+ for 5 years I will take another look at RS.
Until then I prefer to continue down the secured property route disposing of the loans when I see an opportunity and eventual complete exit as I believe that the property market is heading for a medium term collapse which will make the 2008 to 2013 falls pale into insignificance.
Interested in your thoughts on the 'medium term collapse'. Is this based on when Carney eventually pushes the button on interest rate rises, with many squeezed incomes unable to support the increase or the 1.3m people with significant shortfalls on interest only or failing endowment policy based mortgages that come to term between now and 2020, with a significant number of those properties then flooding the market or the gradual increase in Loan to Income which is now pushing 12% at 4.5x or above LTI or do you have other thoughts as to why you anticipate a medium term collapse/re-aligned of house prices. Thoughts much appreciated A combination of your three points plus the economy stalling.
The current “recovery” is unsustainable being based on the housing market and consumption fuelled by credit and will merely create a short term boom prior to the election and bust in the medium term.
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pikestaff
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Post by pikestaff on Jul 14, 2014 16:58:43 GMT
yorkshireman I have to say I'm mystfied as to why you would invest in property if that is your view. What makes you so confident that you will be able to get out before the proverbial hits the fan? I happen to think that 6% (or even 5%) on RS 5 years is a fair return for the relatively low risk, but each to his own...
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Post by yorkshireman on Jul 14, 2014 18:11:43 GMT
yorkshireman I have to say I'm mystfied as to why you would invest in property if that is your view. What makes you so confident that you will be able to get out before the proverbial hits the fan? I happen to think that 6% (or even 5%) on RS 5 years is a fair return for the relatively low risk, but each to his own... My strategy is to exit property by the end of 2015. I don’t anticipate any turbulence in the market pre election, the government will make sure of that, politicians of all hues can’t afford to have voters upset by falling house prices.
With regard to Ratesetter, I agree that current rates are fair compared to those offered by banks and building societies but my RS portfolio still contains 3 year loans at 7.4% and 5 years at 8.0% with the best part of a year still to run. My view is that if rates have dropped from those heights in little more than 2 years then what is to stop them returning to those levels in a similar time scale?
Now, if I could time my property exit to coincide with the RS increases…..
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mikes1531
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Post by mikes1531 on Jul 14, 2014 18:25:44 GMT
What makes you so confident that you will be able to get out before the proverbial hits the fan? This is a very pertinent question. I'm not so pessimistic about the property market, but I'm rather disappointed by my recent attempts to sell loan parts in the Aftermarket. I've been trying to sell a number of units in Epp***, Ha*****, and/or Ip***** to raise money to cover my upcoming tax bill. Not knowing which might sell, I put more on the market than I needed to sell. At first, I was worried that they all might sell too quickly and that I might end up with too much idle cash before I could pull the extra units off sale. I needn't have worried. Sales have been extremely slow, and now I'm concerned that I might not be able to raise the cash I need in time. These all were 6-month loans and, unless Aftermarket activity picks up, they all seem likely to have significant numbers of units for sale when they reach maturity. And that's without considering all of the shadow bids that will need covering as existing pending loans reach drawdown. For instance, the WLCH loan must be very close to drawdown as the most recent note shows an expected date of 10/Jul. Some of the £276k of non-underwriter bids on that loan are likely to be shadow bids, and some of those lenders are likely to want to sell some parts in other loans to provide the cash to settle their shadow bids.
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Post by davee39 on Jul 14, 2014 18:34:21 GMT
yorkshireman I have to say I'm mystfied as to why you would invest in property if that is your view. What makes you so confident that you will be able to get out before the proverbial hits the fan? I happen to think that 6% (or even 5%) on RS 5 years is a fair return for the relatively low risk, but each to his own... My strategy is to exit property by the end of 2015. I don’t anticipate any turbulence in the market pre election, the government will make sure of that, politicians of all hues can’t afford to have voters upset by falling house prices.
With regard to Ratesetter, I agree that current rates are fair compared to those offered by banks and building societies but my RS portfolio still contains 3 year loans at 7.4% and 5 years at 8.0% with the best part of a year still to run. My view is that if rates have dropped from those heights in little more than 2 years then what is to stop them returning to those levels in a similar time scale?
Now, if I could time my property exit to coincide with the RS increases…..
Zopa and RS rates tracked down as the Govt flooded the banks with funding for lending cash. We now have some 5 year LOANS offered at less than 4% by cash rich institutions. Since savers have appeared content to leave their cash on deposit at rates as low as 0.05% I cannot see the improvements you are looking for, although RS does seem capable of some temporary upticks. My guess is that a 2% rise in base rates will lead to a 1% rise in savings rates, and the personal loan market will remain cut throat, limiting the scope for RS and others to sell dearer loans. As this thread shows we all have our own risk/reward settings and will settle where we feel most comfortable.
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Post by dram2013 on Jul 17, 2014 12:08:45 GMT
Could I ask why lenders are happy to take much lower rates on other platforms that are relatively unsecured, but on AC where there is security there are questions about rates being low? In the past, I know we have offered 10%+ on a number of loans and much higher as well, but please remember we price for risk, not liquidity. If I priced for liquidity, the reverse auction would be in full swing. Looking round the market, the starting rates for lenders for 5 years vary from 4% on unsecured personal lending to 6% on secured. We are offering 9%+ on secured lending. As yet we have not lost a single penny, and the one very bad case looks likely that a full recovery in achievable. So we are 100% higher than unsecured personal lending and 50% higher than other secured lenders. I will listen to the arguments made here, but my perception is we are offering market leading rates and security on loans. The market is more competitive, but also we are attracting better quality loans as well. Some will state London retail isn't for them and everyone is entitled to their opinions however we will continue to offer such loans in future. Andrew I concur with "westcountrylender". I mostly discount security because it is hypothetical and I have not yet seen much evidence of full and prompt recovery - I have a nasty suspicion that the legal process of recovery will be drawn-out and the final pot much diminished by legal fees. Instead, I focus on spreading risk and aim to limit each loan to 0.5% or less of my total investment. I find FC good for this because of the large number of loans on offer and the fast drawdown. Moreover, with a bit of time and effort, one can be successful with bids in the 9-14% range - I normally manage to lend to 5-10 businesses per week. Although I am also with TC because of the higher rates on offer, my need to spread risk means I can't invest as quickly as I would like because of the limited number of loans listed each month. I only use RS as a low-risk interest-bearing "current account" - transferring to other platforms when lending opportunities arise. By contrast, AC offers far fewer opportunities than FC, lower rates than TC and (reportedly) slow drawdown. I will be lending through AC, but mostly because I simply need more "cheese" rather than because I think that the security offered justifies a lower rate than TC.
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Post by andrewholgate on Jul 17, 2014 12:19:54 GMT
To expand that question. Other than for diversification, why are lenders happy to lend at just over 6% for 5 years or under 5% for 3 years on Ratesetter when AC offer more transparent security for shorter terms or even FC’s property loans at 7-8% for 12/18 months with first charge security?
Yes, I’ve been critical of AC and pilloried FC but I’m mystified by the preference for RS.
Ratesetter offers completely transparent security. If a borrower defaults the '100% fund' makes the payment, and the saver never even notices. Property is only security if can be sold for more than the loan value. This cannot be 100% guaranteed within a reasonable timescale - just ask the Irish Banks, HBOS etc. I have absolutely no complaints about AC as a non investor, however I am happy that the lower returns on other platforms fall better within my appetite for risk. I do dabble in FC, because at present the secondary market allows strategies aimed at maximizing returns while minimizing risk - I have never failed to sell a non property loan at par after reaping a few months interest. My only comment is that a 100% fund is only good if the fund covers all the loans that go bad. In a benign credit environment 1.5% is a reasonable figure to hold back, but RBS failed with 5% in reserve.
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