benaj
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Post by benaj on Mar 20, 2019 14:06:09 GMT
I had an October 6.8% one repaid this morning - others from October at that rate and 6.9% still going at the moment. It would be interesting if more people shared their rates of October orders repaid early. I'm wondering if loans at lower rates were repaid earlier too? Yup, my "lower rates" from October got repaid, those 6.4% ones.
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smezz
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Post by smezz on Mar 20, 2019 16:05:06 GMT
On my main ISA account I got 21 orders in Oct ranging from 6.6% to 6.9%.
2 of these repaid early one 6.6% after 4 months, the other 6.7% after 11 days - the rest are still going. 12 of those remaining are 5 year contracts, 4 are 4 year and 3 are 3 year..
On this account in total I've had 114 orders, 22 have paid back early (19.3%) after an average of 5 months. Most of these were low rate orders placed before I figured out a better strategy.
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Stonk
Stonking
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Post by Stonk on Mar 20, 2019 20:40:12 GMT
I bought 13 loans on the 5 Year market in October 2018: 2 at 6.6% 4 at 6.7% -- 2 of which have repaid (1 very quickly)
6 at 6.8% -- 2 of which have repaid (1 in under a month) 1 at 6.9%
In terms of the amount loaned in those 13 loans, 35% has been repaid early.
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spiral
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Post by spiral on Mar 21, 2019 8:04:06 GMT
The only thing that affects whether higher rates repay earlier than lower rates is partial early repayments.
e.g. Borrower borrows 5K from RS at 8%, lender A lends 3K@7%,lender B lends 2K@6% to make up the contract.
Scenario 1, loan runs to completion, both lenders receive their full rate for the duration. Scenario 2, the borrower repays the loan early in full (or the loan is defaulted by RS), both the 7% lender and the 6% lender are both repaid in full at the same time. Scenario 3, the borrower repays 2K early, lender A receives a partial repayment of 2K from their 3K contract and lender B receives no repayment. Outcome is Lender A now has 1K@7% and lender B has 2K@6%.
So scenario 3 is the only method that results in a bias towards higher rates repaying before lower rates.
Whether or not higher rate borrowers repay earlier than lower rate borrowers is not affected by the rate you get as your rate is not linked to the rate the borrower gets.
Assume an additional borrower borrows 5K @10% but in this case the lender orders are 3K@5% and 2K @4%.
If this second borrower is more likely to repay earlier than the first (10% loan v 8% loan), the most likely rate to get repaid early is the 5% rate, not the 6 or 7% which are matched to a lower rate contract.
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Stonk
Stonking
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Post by Stonk on Mar 21, 2019 9:32:21 GMT
I have crunched a few more statistics.
I first used the 5 Year Market on 7 April 2017 (almost 2 years ago). Since then:
-- I have purchased a total of 151 loans on the 5 Year Market, at an average rate of 6.189%.
-- 45 of the purchased loans have repaid in full early. This is 30% of the number of loans, and 36% of the principle loaned.
-- The average length of a loan that has repaid in full early is 188 days. A third of them lasted less then 3 months.
-- The average rate of a loan that has repaid in full early is 6.371%.
-- 106 of the purchased loans are still open, at an average rate of 6.111%.
There is slight but not overwhelming evidence that loans which repay early tend to have higher rates.
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spiral
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Post by spiral on Mar 21, 2019 14:34:06 GMT
There is slight but not overwhelming evidence that loans which repay early tend to have higher rates. You cannot tell that from the rate that you have lent at because you are making the assumption that a higher rate for you = a higher rate for the borrower.
As I said above, you may have orders at 6.5% in 8% loans or 6.1% in 10% loans. If there is a greater likelihood of higher rates repaying early, the 6.1% would have the higher likelihood as that is in the loan with the higher rate. The only thing that creates a bias towards higher rates are partial repayments because they repay the higher rates first.
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Stonk
Stonking
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Post by Stonk on Mar 21, 2019 14:53:27 GMT
There is slight but not overwhelming evidence that loans which repay early tend to have higher rates. You cannot tell that from the rate that you have lent at because you are making the assumption that a higher rate for you = a higher rate for the borrower.
As I said above, you may have orders at 6.5% in 8% loans or 6.1% in 10% loans. If there is a greater likelihood of higher rates repaying early, the 6.1% would have the higher likelihood as that is in the loan with the higher rate. The only thing that creates a bias towards higher rates are partial repayments because they repay the higher rates first.
I'm not saying anything about the mechanism of how it works, and I'm not assuming that my rate is related to the borrower's rate. Merely that, from my viewpoint, there has been a slight tendency for loans at higher rates (my rates) to be repaid early. Even then, it is hardly conclusive, given the size of the difference and of the sample. The jury is out.
I can't help but think that there must be some correlation between lender and borrower rates. If it's costing RS more to match to lenders, then they will protect their margin by quoting higher rates to their borrowers, so if you have picked up a basket of loans during a time of high lender rates (e.g., October 2018), they might have higher than normal borrower rates too. However, any such correlation probably wouldn't be visible down at the tenth-of-a-percent level, and would probably lag behind the market by some time.
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smezz
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Post by smezz on Mar 21, 2019 14:56:20 GMT
Did you check for multiple contracts against a single loan?
I've just noticed 6 contracts to 1 loan and 5 to another.
With small numbers it makes a big difference to the % figures how you count them.
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spiral
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Post by spiral on Mar 22, 2019 8:09:57 GMT
I can't help but think that there must be some correlation between lender and borrower rates.
You would think that would be the case and if it was a true market (like the original zopa model) it would, but AIUI, the offer is made to the borrower today at an approved rate and they have something like 2 weeks to take up that offer. (This will be why you see "borrower offers" on the market outside of working hours).
It is only then that RS accesses the market place to match the loan so if I had a loan quote today for 8% and next week something happens that drives lender rates up a couple of percent, I could in theory get my 8% loan using lender orders of 8.5% and it's RS that take the hit.
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