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Post by justuslee on May 10, 2018 16:02:53 GMT
I am sure that it comes as no surprise to active lenders, that there is currently a risk-reward disconnect between ISA Money and Non-ISA money.
Our HNW lenders and IFA introduced lenders, have 2 interest rate expectations on their money.
In simple terms, this is roughly 2-3% differential yield expectation p.a. which is a discount flowing through to lower cost of borrowing and better quality borrowers who quite correctly can command lower interest rates creating a virtuous cycle.
ISA money is disrupting the traditional price of capital, making P2P ISA borrowing considerably more attractive than it was before. Traditional banks and balance sheet lenders are starting to feel the disruption, we as a platform have since formation, planned to attract these prime borrowers reducing the risk of capital loss for our growing lender base.
We do however currently have a dominance of ISA money flowing onto the platform and we are keen to continue to attract non-ISA capital.
We are seeking feedback from all lenders, market forces will dictate the future gross interest rates payable by borrowers.
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SteveT
Member of DD Central
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Post by SteveT on May 10, 2018 16:06:30 GMT
Your poll range doesn't go high enough.
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Steerpike
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Post by Steerpike on May 10, 2018 17:27:49 GMT
I have invested in the auto invest AC PSA which is protected with a provision fund and suffers from little or no cash drag and I get the same 5.5% target rate inside and outside the ISA wrapper. I put a value of about 1.5% on the PF protection so 7% plus for me.
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Post by mrclondon on May 10, 2018 19:10:36 GMT
As a starting point
71-75% LTV 13%
61-70% LTV 12%
51-60% LTV 11%
41-51% LTV 10%
<= 40% LTV 7 to 9%
then vary by +/- 1% depending on an assessment of the integrity of the borrower (a measure of risk of default), and by +/- 2% on the uniqueness of the property (as a measure of likely demand at auction).
ISA vs non-ISA totally irrelevant to me, as the tax on non-ISA will be offset through SIPP/EIS/SEIS/VCT if not by p2p capital losses. The gross yield is the only valid measure. (I am using IFISA's at present, but primarily to build up a store of ISA allowances ready to switch to S&S ISAs with the 25% tax free cash from my equity invested SIPP in a few years time.)
(Not voted as your poll makes zero sense to me, it seems to be simpifying matters way beyond what is sensible).
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Post by Admin on May 10, 2018 19:36:45 GMT
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Post by justuslee on May 11, 2018 9:23:29 GMT
Good morning mrclondon I don't think our current risk grades and yields are that far off your starting point, particularly taking into account your 3% swing due to borrower and asset quality. From your comments I presume you would declare yourself as a sophisticated investor? Interestingly, the IFA market desire simple IF-ISA products that their clients will understand and we believe that our Prudent, Balanced and Adventurous ISA pots give them exactly that.  As a starting point 71-75% LTV 13% 61-70% LTV 12% 51-60% LTV 11% 41-51% LTV 10% <= 40% LTV 7 to 9% then vary by +/- 1% depending on an assessment of the integrity of the borrower (a measure of risk of default), and by +/- 2% on the uniqueness of the property (as a measure of likely demand at auction). ISA vs non-ISA totally irrelevant to me, as the tax on non-ISA will be offset through SIPP/EIS/SEIS/VCT if not by p2p capital losses. The gross yield is the only valid measure. (I am using IFISA's at present, but primarily to build up a store of ISA allowances ready to switch to S&S ISAs with the 25% tax free cash from my equity invested SIPP in a few years time.) (Not voted as your poll makes zero sense to me, it seems to be simpifying matters way beyond what is sensible). |
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Post by justuslee on May 11, 2018 9:50:49 GMT
This is a really enlightening poll, and the comments are very much appreciated.
I am sure savvy lenders are more than aware, that once the ISA money starts to dominate any platform liquidity, nearly all loans will be filled as soon as they are approved by ISA pot auto-bids, making individual loan selection redundant.
Individual loan selection will only be relevant when purchasing loans on the secondary market, however this will also become redundant if lenders decide to initiate auto-bid on secondary markets. Something we have decided not to switch on at the moment.
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