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Post by westonkevRS on Jul 19, 2014 9:03:16 GMT
Fair enough, tough language. But it is very interesting to read people's strategies to either take a risk and maximise income or lend quickly at today's rate. Or even jump the queue and lend instantly at 0.1% lower. The market is 100% fair and transparent. You can see all the offers large and small, and nobody has an advantage (neither myself, institutions or "city boys"). I love it and this level playing field is integral and will never be compromised.
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Post by geoffrey on Jul 19, 2014 9:09:55 GMT
Why do you say 'got greedy', please? Why not just 'covered a higher position'?
Methinks he doth protest too much! This thread was about whether RS actively manages rates as other P2Ps do (and I realize that the mechanism I suggested is unlikely -- there are lots of other ways to manage supply and demand, such as injecting liquidity, etc., just as the dear old B of E does). In general, though, transparency is a better tactic than defensiveness.
Westonkey mentions that he *could* (but doesn't) use insider knowledge of the short-term pipeline, but says that instead he (and by implication we) should just accept whatever rate we like and not get too greedy. Well, why not give the rest of us lenders a view of the pipeline, so that we can make a rational decision based on full market transparency? One thing that's puzzled me for a while is that the "full view of market" only shows one, at most two, loan requests at a time, instead of displaying the queued requests in the same way that all the loan offers are displayed. We're only getting one side of the supply-demand equation, and have to rely on not-so-accurate volume predictions if we want to take rational market-based decisions. Being fully transparent in this way might actually eliminate "greed", because lenders would be able to see whether a higher rate has any chance of being matched and can do the time-versus-income calculation for themselves.
On this last point, simplistically, I calculated 6.3% versus 6.4% as representing 6 days' differential on the basis that the rates are annualized and 1/365th of 6.4 is 0.018 (x 6 = 0.1 -ish). Is that too mathematically naïve as a rule of thumb? I understand compounding can introduce big variations, but RS publishes annualized rates assuming full reinvestment of repaid capital each month.
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Post by geoffrey on Jul 19, 2014 9:13:43 GMT
The market is 100% fair and transparent. You can see all the offers large and small, and nobody has an advantage (neither myself, institutions or "city boys"). I love it and this level playing field is integral and will never be compromised. Thanks for the reassurance. I also like RateSetter, as it is one of the few P2Ps that still actually has a market. But I think full transparency could be served by providing more information to lenders on the demand pipeline.
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Post by GSV3MIaC on Jul 19, 2014 11:18:05 GMT
On this last point, simplistically, I calculated 6.3% versus 6.4% as representing 6 days' differential on the basis that the rates are annualized and 1/365th of 6.4 is 0.018 (x 6 = 0.1 -ish). Is that too mathematically naïve as a rule of thumb? I understand compounding can introduce big variations, but RS publishes annualized rates assuming full reinvestment of repaid capital each month.
You are ignoring the fact the rate, and thus the loss, is fixed for 5 years .. i.e. applies to 2.5 x the starting sum, using a crude straight line repayment approximation
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Post by GSV3MIaC on Jul 19, 2014 11:21:15 GMT
Fair enough, tough language. But it is very interesting to read people's strategies to either take a risk and maximise income or lend quickly at today's rate. Or even jump the queue and lend instantly at 0.1% lower. The market is 100% fair and transparent. You can see all the offers large and small, and nobody has an advantage (neither myself, institutions or "city boys"). I love it and this level playing field is integral and will never be compromised. I guess MY question, which I haven't really seen an answer to, is how this (Business Bank) money is going to be fed in to the system i.e. what interest rate, and what percentage of each loan, and over what time period. I assume they are not going to dump in £10m at 6.1% on day1 and stand back?! I also assume they are only funding the business loans - an option I might like to have myself!!
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Post by westonkevRS on Jul 19, 2014 14:29:42 GMT
Let's be clear, I don't "know the pipeline", only what we've done before and therefore forecasts. These are on the web page. I couldn't know if Joe Bloggs was thinking of applying for a loan tomorrow. Maybe I soon refrain from lending if people think it somehow I have an advantage, but I'm sure you'd rather I had skin in the game the same as yourselves!
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Post by geoffrey on Jul 19, 2014 15:40:30 GMT
Let's be clear, I don't "know the pipeline", only what we've done before and therefore forecasts. These are on the web page. I couldn't know if Joe Bloggs was thinking of applying for a loan tomorrow. Maybe I soon refrain from lending if people think it somehow I have an advantage, but I'm sure you'd rather I had skin in the game the same as yourselves! Please don't refrain from lending. It is reassuring that you trust your systems enough to put your own money into them.
I assumed by "pipeline" that you were referring to the "Approved" demand on your Volume page: £1.6M for the five-year market as of today, with £255K expected to match in the next 24 hours. What we're missing, ISTM, is some way of representing those "approved" loan requests/credit lines in the same way that all the lender offers are listed when you "view full market". Maybe ordered by expiry date and then by (synthetic) interest rate requested? Or aggregated by rate requested, sorted by expiry date? (I'm just guessing.) Something like this could help balance out the supply and demand more rationally.
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Post by geoffrey on Jul 19, 2014 16:03:09 GMT
You are ignoring the fact the rate, and thus the loss, is fixed for 5 years .. i.e. applies to 2.5 x the starting sum, using a crude straight line repayment approximation
Aah, thank you. So the extra gain from achieving a higher initial rate is effectively amortized.
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Post by GSV3MIaC on Jul 19, 2014 16:32:31 GMT
Not sure 'amortised' is quite the right word, but basically any rate increase/decrease has to be considered against the sum/period over which it'll apply .. work in pound-years. An interest only loan gives a different answer from a repayment loan (for which 'average of half the amount will be outstanding' is a crude approximation), and 1 year gives different answer from 5 year. On the one month market clearly getting and extra 0.1% by waiting 2 weeks is damn silly, on the 5 year market it might just about make sense; on an interest only, 'forever' loan it'd be a bargain to get an extra 0.1% by waiting.
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Post by geoffrey on Jul 20, 2014 8:04:38 GMT
On the one month market clearly getting and extra 0.1% by waiting 2 weeks is damn silly, on the 5 year market it might just about make sense; on an interest only, 'forever' loan it'd be a bargain to get an extra 0.1% by waiting.
Amortized was just shorthand for me to conceptualize it. But thank you, those examples make it very clear.
I guess there are other factors in play as to why people leave fairly large sums languishing at rates where there is no hope of a match (other than forgetting). One has to balance the opportunity cost of tying up a sum of liquid capital (albeit for not as long as five years would suggest) against the reward on offer. Also, since getting unlent money out of RS is now faster than getting it in, money that would otherwise be earning 0% or 0.1% in bank accounts can be held in RS pending better opportunities either in RS or elsewhere (a sudden spike in rates or a stock market pullback, for example....). Now, if only RS loans could be inside a NISA...
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spiral
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Post by spiral on Jul 20, 2014 9:25:04 GMT
I guess there are other factors in play as to why people leave fairly large sums languishing at rates where there is no hope of a match
ATM in 5yr there is 53.5K at >= 7.0% spread across 185 offers thus averaging 289 in each offer (including 1 offer of 68 at >100%). They're not going to get matched anytime soon!
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Post by geoffrey on Jul 20, 2014 13:56:09 GMT
Five lenders (or may be one very rich lender) upload an average of 10 grand each on a Sunday, and offer over £50K for loan at 6.0%? How? Why? Are they just extraordinarily altruistic, or just a bit dumb? There's no doubt the entire sum would have matched on Monday at 6.2%, at least, probably even at 6.3% or higher. Is it even possible to upload £10K by debit card (and does it show instantly even on a Sunday)?? Hmmmmmmm. Maybe they know something we don't...
Subsequent edit: It wasn't five lenders at £10K because £23K just matched and there are still five lenders offering at 6.0% Suggesting one lender has somehow uploaded more than £23K on a Sunday... I doubt my bank would let me do that by debit card... Curiouser and curiouser.
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Investor
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Post by Investor on Jul 20, 2014 14:15:26 GMT
Believe it was a single offer of £50k at 6.0%. When it first showed up it was a single offer. Wonder where that came from . Certainly is affecting the rate, we would be half way through the 6.3 offers and moving close to 6.4 if it were not for that loan. Weird isn't it as money I transferred on Friday still isn't available to me. Also noted that when it was invested this morning, there were no offers at 6.1 so sounds like some timed pre-bid type thing to me. looks like we may be evening out the weekend spikes
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spiral
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Post by spiral on Jul 20, 2014 14:30:34 GMT
Five lenders (or may be one very rich lender) upload an average of 10 grand each on a Sunday, I've seen this too and always assumed they'd moved the money from one of the other markets. That still doesn't explain why they want to undercut the current rate by so much.
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Post by geoffrey on Jul 20, 2014 14:48:16 GMT
Yes, and it's causing other smaller lenders to add in money at that rate. All but £14K gone now -- it certainly brought the borrowers scuttling out of hiding. Still can't understand why someone with that much money would take out nearly 10% of the entire market volume at that rate.
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