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Post by shanghaiscouse on May 4, 2020 8:44:20 GMT
Also, if anyone thinks this is as bad as it is going to get, you are in cloud cuckoo land. Increasing the amount of interest going to the fund isn't going to help when your defaults are quadrupling. This is just the first step in death by a thousand cuts. IMHO.
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Post by davee39 on May 4, 2020 8:47:42 GMT
This is inevitable due to the provision fund design.
With a large increase in loans entering forbearance (word of the month), the PF pays out in full on the first missed payment. In the last two weeks 10% of my queued 5 yr withdrawal has repaid as a result of PF payouts. RS does not know how many of these loans will get back on track (boosting the PF) or will ultimately go bad.
However RS cannot escape all the blame. I have been withdrawing repayments for some time due to what looked like inadequate provisioning. There are underlying problems linked to moves into business and property loans.
The future? Zopa is an even bigger mess. I suspect they will seek to shed their P2P side if the Bank gets established and RS would be an obvious partner to pick it up.
Oh, and a surge in RYI's to the queue, which will be hard to satisfy due to declining re-investment.
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Post by oppsididitagain on May 4, 2020 8:53:48 GMT
You can get more interest than 1.5% in a fully protected account. Hmm. MSE has a few that are not term deposits, but they are very limited as to both time and the amount on which the interest is paid. For significant amounts with a FSCS guarantee the best rate they currently have is 1.75% for a 3 year term deposit at FCMB Bank UK (no, I've not heard of them either). If you are willing to lock you money up for that long, consider Downing Crowd Funding. The bonds on offer there (not frequently, they are very selective) are not guaranteed but have low LTVs. Or, for liquidity, invest in listed bonds via either a bond fund or Wise Alpha. But that comes with mark-to-market risk. Not sure you can get 1.5% in an access account, best Ive seen is 1.2%. One with SAGA and one with Marcus which is run by Goldman Sachs. I would never lend to GS out of principle. I wouldn't lock my money away for 3yrs for a rate less than inflation, you may as well go and stick it all in a blue chip company, Tesco's, GSK, Vodafone etc and hope the Divi's get reintroduce. Plenty of opportunities out there to make more than 2% a year..
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pip
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Post by pip on May 4, 2020 8:57:13 GMT
Absolutely, reality is that many borrowers are now either unemployed, furlowed, business shut, trade 80% down and future totally uncertain. Repaying RS loans will probably be pretty low on the priority list when some income returns. Obviously not as bad for everybody and business but for many this is the situation. As I said on another thread I think I will get about 50% of my outstanding capital back. Making more in interest than capital losses, in my opinion very unlikely. Maybe I am being too pessimistic, but all things considering I think it's about right. On some platforms 50% may be too optimistic, especially if the platform itself starts to keel over,
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sb
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Post by sb on May 4, 2020 8:59:43 GMT
What losses do you expected on the underlying loans (before PF)?
My finger in the air guess is 10-15%.
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r00lish67
Member of DD Central
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Post by r00lish67 on May 4, 2020 9:09:57 GMT
Absolutely, reality is that many borrowers are now either unemployed, furlowed, business shut, trade 80% down and future totally uncertain. Repaying RS loans will probably be pretty low on the priority list when some income returns. Obviously not as bad for everybody and business but for many this is the situation. As I said on another thread I think I will get about 50% of my outstanding capital back. Making more in interest than capital losses, in my opinion very unlikely. Maybe I am being too pessimistic, but all things considering I think it's about right. On some platforms 50% may be too optimistic, especially if the platform itself starts to keel over, You really are being far too pessimistic in my view. To quote from the way RS have calculated their expected losses " we have also used economic forecasts from specialists Oxford Economics in our calculation of Expected Future Credit Losses, and in view of the economic uncertainty, we have chosen to apply full weighting to their downside economic case"Now, ok, we can all scoff about their credentials or independence, but it has to be said that RS have done this analysis and only chosen to halve investors interest at the moment. They could have stripped it entirely, or they could have called a capital event and struck out capital too. As it is, they currently believe they have 166% coverage on a capital basis. Bearing in mind they've currently chopped off circa 2% interest from people, things would have to be 24x as bad to reach your projection. Does that really sound realistic at this stage? Especially bearing in mind there is still a PF of which investors interest is being funnelled towards. edit. Re: fundamentals, 70% of their lending is to individuals. Many of whom are still on 80% pay with much reduced expenditure in the current climate. Most of the rest is property, which they've said they're still funding and so should be completed. Accept though that the calculations would all change if RS were to fail entirely. edit2: possibly some shoddy maths in my "24x" when I squint harder, but anyway the gist remains - it'd have to be a lot lot worse than it is at present.
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pip
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Post by pip on May 4, 2020 9:16:47 GMT
What losses do you expected on the underlying loans (before PF)? My finger in the air guess is 10-15%. 50%
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Post by scepticalinvestor on May 4, 2020 9:22:46 GMT
I notice when you log in on the first page the going rate column is still showing 3%, 3.5% and 4%. It would be typical of the behaviour of larger P2Ps if they tried to make an argument not to update this to the 1.5%, 1.75% and 2% numbers they have announced. Its rather like Funding Circle boasting how its investor numbers keep going up - its because you cannot get your money out !
I have a lot of respect for RS, but this is really really poor of them. As of today, if the going rate for new investors is 1.5%, 1.75% and 2%, it is quite misleading to put up headline rates of 3%, 3.5% and 4% on there.
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on May 4, 2020 9:22:51 GMT
Absolutely, reality is that many borrowers are now either unemployed, furlowed, business shut, trade 80% down and future totally uncertain. Repaying RS loans will probably be pretty low on the priority list when some income returns. Obviously not as bad for everybody and business but for many this is the situation. As I said on another thread I think I will get about 50% of my outstanding capital back. Making more in interest than capital losses, in my opinion very unlikely. Maybe I am being too pessimistic, but all things considering I think it's about right. On some platforms 50% may be too optimistic, especially if the platform itself starts to keel over, edit: Ref: fundamentals, 70% of their lending is to individuals. Many of whom are still on 80% pay with much reduced expenditure in the current climate. Most of the rest is property, which they've said they're still funding and so should be completed. Accept though that the calculations would all change if RS were to fail entirely. Covid appears to have had a positive effect on consumer debt with the largest reductions since BoE records began. www.p2pfinancenews.co.uk/2020/05/01/households-repaid-record-net-amount-of-consumer-credit-in-march/
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spiral
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Post by spiral on May 4, 2020 9:24:36 GMT
Actually if you think this is as bad as it gets, now IS the time to invest because new lending is immune from this rate cut.
Quote from investor T&C's 20/3/19
"The amount of any reduction will apply equally to all RateSetter investors entitled to protection from the Provision Fund as at the date the Stabilisation Period is entered into"
So future investing gets the rate they match at (subject of course to any future additional stabilisation period being announced)
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chris1200
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Post by chris1200 on May 4, 2020 9:27:57 GMT
Actually if you think this is as bad as it gets, now IS the time to invest because new lending is immune from this rate cut.
Quote from investor T&C's 20/3/19
"The amount of any reduction will apply equally to all RateSetter investors entitled to protection from the Provision Fund as at the date the Stabilisation Period is entered into"
So future investing gets the rate they match at (subject of course to any future additional stabilisation period being announced)
Seems not as the info page says "This applies to all existing and new investments across all our investment products" (see the FAQs on www.ratesetter.com/stabilisation-period)Edit: Looks like they've also temporarily closed to new investors: "We are temporarily not open to new investors. We want to make sure the interest reduction announcement beds in, and also update our Appropriateness Test (the test all new investors need to complete before opening an account with RateSetter) to ensure new investors understand the interest reduction. We expect this to take a week or two, and we will then reopen to new investors. We remain open for new investments from existing investors."
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Post by angel19 on May 4, 2020 9:33:49 GMT
Yes, sorry to disappoint but the reduction applies to all existing and new investments across all investment products.
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ton27
Member of DD Central
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Post by ton27 on May 4, 2020 9:36:36 GMT
Was expecting this to be honest and if it means platforms surviving and coming out the other end then so be it. At least they are trying something. We're in rotten times, get used to it. Not long before negative rates being the norm the way central banks are playing things so enjoy these new rates while they last.. I was expecting a cut in rates but not a halving of them. It seems like a sensible thing for Ratesetter to do but unfortunately will result in a lot more withdrawal requests - the exact opposite of what they need but I am sure they understood this when they took the decision.
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gg
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Post by gg on May 4, 2020 9:39:19 GMT
If this move helps to safeguard people’s capital then it’s a welcome move.
RYI should be limited to 25% of your invested capital before you move to the back of the queue. Some people NEED their money to pay bills or buy food. Even a limit of £2,500 per month would seem reasonable to me.
gg
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Post by jaycee on May 4, 2020 9:39:34 GMT
Can't see RS receiving many new investments after this. Can get 1.5% with full protection and access to funds when required. I can see RS RYI dropping to virtually zero, especially as RS are making new loans. If you have been lending at 3%, the new rate is an annualised rate of 2% (not 1.5%) for 2020, but still not very attractive. Considering the BOE rate is now .10 % people are going to have to get used to lower rates everywhere. It could be worse, RS could start charging you a fee as well ! and as I have said before on another thread, the quickest way (at the moment) to get your money back is to hope a loan defaults and the PF pays out for you. The BoE rate doesn't drive retail lending. At a time of heightened fear about risk, and deleveraging, interest rates should going up, not down. This can be seen by the fact RS is unable to pay back even those in the account it marketed as "Access". The desire to lend and borrow are out of whack. You fix that by increasing the cost to borrow, or the reward for lending, not by further punishing those willing to lend.
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