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Post by fuzzyiceberg on Oct 28, 2017 15:56:05 GMT
We all know that Zopa's computers whirl away trying to balance all our accounts with microloans that will*, in aggregate, deliver something like the target return for the particular account.
* Subject to a bit of expected variability and Zopa's expected credit defaults being accurate.
What happens when interest rates change? As a thought experiment imagine Mark Carney et al actually do what they say and raise base rate 0.25% on November 2nd, and imagine that in response Zopa raise all new borrower rates by 0.25% and pas it through to lenders, so consequently expected lender returns also rise by 0.25%. Does the Zopa algorithm then have a 'fresh start', ignore the position on 1st November and start optimising portfolios to the new rate on the basis of microloans from 2 November onwards only? Does it try some sort of blended approach - perhaps time apportioned over the calendar year in which case new lenders and those who have increased their lending during the year to November will be impacted a bit unfavourably. Maybe it is really clever and takes weighted average monthly balances into account. But maybe it is all moot and the Zopa believe algorithm is good enough that pretty much everyone is on target pretty much all the time so it can be ignored and just reset for the new rate.
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aju
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Post by aju on Oct 28, 2017 17:40:24 GMT
I'm tempted to say that most of the workers at zopa probably don't even know what a rate rise means, but I guess that's a bit of a non pc argument.
What gives you the wild notion that this will change anything - for the high street banks I was under the impression that the connection between the base rate and any interest the consumer gets was lost ages ago.
Perhaps Zopa will go the way of the banks and keep the increases to themselves until one of them splits from the pack and starts to offer better deals. They will increase the rates on the loans side at their peril. Perhaps they will all be waiting to see who blinks first.
I'm off to hang up me cynical hat now as its time nearly to disengage brain and watch X factor for the evening.
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Post by WestonKevTMP on Oct 29, 2017 6:36:14 GMT
I'm tempted to say that most of the workers at zopa probably don't even know what a rate rise means, but I guess that's a bit of a non pc argument. What gives you the wild notion that this will change anything - for the high street banks I was under the impression that the connection between the base rate and any interest the consumer gets was lost ages ago. Perhaps Zopa will go the way of the banks and keep the increases to themselves until one of them splits from the pack and starts to offer better deals. They will increase the rates on the loans side at their peril. Perhaps they will all be waiting to see who blinks first. I'm off to hang up me cynical hat now as its time nearly to disengage brain and watch X factor for the evening. Fully agree. And this is why RateSetter was always my favourite platform (as lender and employee). If we put to one side the vagaries of the APR paid by borrowers, the RateSetter returns are set by lenders. All else being equal, this should move in step with the wider interest rates, either inflationary or Bank of England rates. Alas it hasn't always worked like that because of imbalances driven by loan supply and demand, but rates set by the people was always the dream.
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coogaruk
Hello everyone! Anyone remember me?
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Post by coogaruk on Oct 29, 2017 12:02:19 GMT
I'm tempted to say that most of the workers at zopa probably don't even know what a rate rise means, but I guess that's a bit of a non pc argument. What gives you the wild notion that this will change anything - for the high street banks I was under the impression that the connection between the base rate and any interest the consumer gets was lost ages ago. Perhaps Zopa will go the way of the banks and keep the increases to themselves until one of them splits from the pack and starts to offer better deals. They will increase the rates on the loans side at their peril. Perhaps they will all be waiting to see who blinks first. I'm off to hang up me cynical hat now as its time nearly to disengage brain and watch X factor for the evening. Fully agree. And this is why RateSetter was always my favourite platform (as lender and employee). If we put to one side the vagaries of the APR paid by borrowers, the RateSetter returns are set by lenders. All else being equal, this should move in step with the wider interest rates, either inflationary or Bank of England rates. Alas it hasn't always worked like that because of imbalances driven by loan supply and demand, but rates set by the people was always the dream. I've been around lending Peer to Peer for long enough to remember when that was Zopa's philosophy too. After all, they started it. Things definitely ain't what they used to be, none more so than in the world of p2p lending today.
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zlb
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Post by zlb on Nov 18, 2017 13:10:24 GMT
I'd only expect them to pass increase in lender rate with increase in borrower rate. Perhaps Z will want to judge the field before acting.
One thing about the microloans - and it's mentioned in another thread which I can't find now, is that it's % diversification of the amount deposited. (think clarified by Aju). I didn't know that until I saw £40 chunks in my loans - which will eventually diminish with re-lending. Therefore not always 'micro' loans, for those who didn't know, like me.
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Post by newlender on Nov 18, 2017 14:28:24 GMT
Well I did know but still got caught with some £40 loans in my ISA. I sold £4K of loans and the cash accumulated in Holding on the Investing side. I absentmindedly shoved the whole lot into my ISA, totally forgetting the % microloan rule. And a few of those loans went into Z+ as I have a small holding in my ISA. It was a bit like doing an online transfer via my bank and then realising I'd sent it to the wrong account. I know I could have withdrawn it as uninvested money before it was lent out, but I didn't look for about 5 days and by that time I had quite a few E loans at 20%+ in Z+ (£40 each).  |
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