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Post by nesako on Nov 29, 2017 13:17:05 GMT
It is for the better (I think), but waiting times will surely increase  |
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IFISAcava
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Post by IFISAcava on Nov 29, 2017 13:17:58 GMT
It is for the better (I think), but waiting times will surely increase Since everyone has been lending at priority, perhaps not that much
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savernake
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Post by savernake on Nov 29, 2017 13:20:01 GMT
Abolition of priority rate is a welcome move. It will at least stop the continual decline in rates. But it still doesn't answer the question of what will happen if/when borrower demand outstrips lender supply? There still isn't any mechanism for rates to increase - unless GS intend on adopting the Lending Works model and simply decide for themselves what the market rate will be every week/month.
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Post by jackpease on Nov 29, 2017 13:22:15 GMT
>>>• When Priority Rate is removed, Market Rate will stabilise and after 30 days will become fixed.
I don't understand. Become fixed? Surely if funds build up and cash drag gets silly then they'll drop rates, not fix them?
Jack P (in edit cross posted with above)
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IFISAcava
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Post by IFISAcava on Nov 29, 2017 13:23:27 GMT
>>>• When Priority Rate is removed, Market Rate will stabilise and after 30 days will become fixed. I don't understand. Become fixed? Surely if funds build up and cash drag gets silly then they'll drop rates, not fix them? Jack P (in edit cross posted with above) or review them periodically and "re-fix" them. See: Lending Works.
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Post by dan1 on Nov 29, 2017 14:00:30 GMT
This will be better for passive investors (it's what the whole platform is about for lenders) but worse for those willing to react to rate reductions. Overall the effective rate (i.e. including the cash drag periods) will remain unchanged unless the imbalance between investors/borrowers changes. It should find a level eventually, somewhere above the AC 30 day access account given the increased platform risk, but perhaps it's being distorted by the welcome bonus which will take 6 months or so to wash out of the system.
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carolus
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Post by carolus on Nov 29, 2017 14:04:12 GMT
Surely this is wrong as it is also based on supply and demand as with Ratesetter. If borrower demand is greater than lender supply on GS then rates would increase. I don't use GS but it doesn't sound like a broken model but merely a lack of borrowers? No. That's not how the Growth Street model works. It's not based on supply and demand in the way you suggest. You have two options, lend at the priority rate or the market rate. The market rate is the rolling average of the last thirty (I think) days lending rates. The priority rate is 0.1% below the market rate. Since you can only lend at or below the market rate, that means that the 30 day rolling average will always be equal to or less than the current market rate. Therefore if even one person is lending at priority, over time the rate would decrease. As it is, there is so much oversupply that it is impossible to lend at the market rate - no money has been matched since June. This means that the 30 day rolling average drops even faster, and so lender rates inexorably decline. There is no mechanic here for rates to increase. jackpease: I'm not making a claim about whether lenders are pulling out of growth street, merely about what would happen in a model in which rates fluctuate with demand. If there is too much lender demand, rates fall until they are no longer as attractive, at which point some lenders cease lending and the rate would stabilise. My point is that that isn't what appears to have happened here.
As to your point about the existence of a mechanic that prevents rates from rising, see above. It's been discussed in multiple threads on this forum as well.
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mary
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Post by mary on Nov 29, 2017 14:26:18 GMT
I'm now out.
While this change and stabilisation will suit many, there is still a large surplus of lenders vs borrowers - £11.7m vs £9.1 of demand with a utilisation of 78% - which means >20% cash drag which equates to just over 4% actual return, which is lower than Rolling at RS recently. If you've exceeded 5% returns recently (as I have) its only because there is a chunk of money not being lent in the Market Rate Queue, which will be merged into the new single queue next month, guaranteeing that everyone has the same cash drag!
However, the primary reason for not even sticking around for my welcome bonus is that defaults are running substantially ahead of contributions to the PF from the borrower levy, and the PF is still solvent only due to substantial contributions from the Founders, which cannot continue indefinitely.
I do appreciate the transparency that GS have provided for me to make this decision, see www.growthstreet.co.uk/investing/statistics, if only all platforms could be this honest!
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IFISAcava
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Post by IFISAcava on Nov 29, 2017 14:31:52 GMT
I'm now out.
While this change and stabilisation will suit many, there is still a large surplus of lenders vs borrowers - £11.7m vs £9.1 of demand with a utilisation of 78% - which means >20% cash drag which equates to just over 4% actual return, which is lower than Rolling at RS recently. If you've exceeded 5% returns recently (as I have) its only because there is a chunk of money not being lent in the Market Rate Queue, which will be merged into the new single queue next month, guaranteeing that everyone has the same cash drag!
However, the primary reason for not even sticking around for my welcome bonus is that defaults are running substantially ahead of contributions to the PF from the borrower levy, and the PF is still solvent only due to substantial contributions from the Founders, which cannot continue indefinitely.
I do appreciate the transparency that GS have provided for me to make this decision, see www.growthstreet.co.uk/investing/statistics, if only all platforms could be this honest!
Good foraging, useful post, thanks I suppose there could be more recoveries - I presume PF pays out early (30 day term) but recoveries come later?
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liso
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Post by liso on Nov 29, 2017 14:39:22 GMT
Very useful to have that information. Thanks mary for posting. |
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mary
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Post by mary on Nov 29, 2017 14:41:11 GMT
I'm now out.
While this change and stabilisation will suit many, there is still a large surplus of lenders vs borrowers - £11.7m vs £9.1 of demand with a utilisation of 78% - which means >20% cash drag which equates to just over 4% actual return, which is lower than Rolling at RS recently. If you've exceeded 5% returns recently (as I have) its only because there is a chunk of money not being lent in the Market Rate Queue, which will be merged into the new single queue next month, guaranteeing that everyone has the same cash drag!
However, the primary reason for not even sticking around for my welcome bonus is that defaults are running substantially ahead of contributions to the PF from the borrower levy, and the PF is still solvent only due to substantial contributions from the Founders, which cannot continue indefinitely.
I do appreciate the transparency that GS have provided for me to make this decision, see www.growthstreet.co.uk/investing/statistics, if only all platforms could be this honest!
Good foraging, useful post, thanks I suppose there could be more recoveries - I presume PF pays out early (30 day term) but recoveries come later? Yes, this is also usefully documented on the stats page, £340k of defaults, £20k of recoveries, to date.
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