jlend
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Post by jlend on Feb 22, 2015 17:54:44 GMT
mike, seriously ;-) ? That same shower that could nor foresee nor prevent or even caused the banking crash ;-) ? The concerns I've raised were major enough, to me, to vote with my feet. For as long as their website is not fixed/clear, so as to inform their customers what kind of loans are arranged and for how much (not just personal loans of £25K max), and more importantly for as long as they remain secretive about their exposure to commercial and property loans (apart from some limited info provided in a blog) and advertise no basic information such as at least the LTV of any secured property, a few others and I will stay away. Let us all know how things go when you have messaged kevin and got responses to your questions.
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Post by westonkevRS on Feb 22, 2015 18:39:25 GMT
I agree and add to that their lack of clarity about why the loan rates for 1 months and 1 year are so much lower than they lend money at. I assume ratesetter are pocketing the difference, however it is clear that if the loan can't be rolled over the lender will be stuck on the lower rate for the duration of the loan and ultimately if the PF is empty will not get all their money back. So in effect people on the 1 month and 1 year are taking on all the risk of longer loans without the same return. It's us - the lenders - me included - that set the rates we are happy to lend to on the 1 month and 1 year market. That is why the rates are lower.
Personally I am happy getting around 3% on the 1 month market - given the risk to my money.
Of course I'd like a higher rate - but the reality is there are 1000's of lenders like me who are willing to lend at these rates given the risk.
I think the provision fund is great - in fact much stronger than I ever imaged back in 2010 when I signed up to ratesetter so I am comfortable with the risk.
When I started working at RateSetter (1st July 2013) there was approximately £1m in the Provision Fund covering £55m of outstanding balances, equivalent to 1.9%. Now there is over £12m representing around 3.8%. I don't mention this as a statement of achievement (although the team has worked hard to get this far), but that in theory the credit risk is stronger based on size and ratio. I also started lending shortly after jlend. Perhaps us early adopters were less risk averse, but either way I find the recent nervousness a little strange. Albeit I appreciate that that way we have chosen to calculate expected losses for the coverage ratio is aggressively prudent and has made people nervous. I also appreciate that some lenders don't agree with our strategy to diversify the lending mix, and that is their prerogative. We must all make our choices. Personally if there was one area I'd be reducing my weight, it's in equities. With markets at near record highs, they could either break the resistance and shoot higher or plummet. Lots of indicators are giving very different directions. Kevin.
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pip
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Post by pip on Feb 22, 2015 19:00:03 GMT
I agree and add to that their lack of clarity about why the loan rates for 1 months and 1 year are so much lower than they lend money at. I assume ratesetter are pocketing the difference, however it is clear that if the loan can't be rolled over the lender will be stuck on the lower rate for the duration of the loan and ultimately if the PF is empty will not get all their money back. So in effect people on the 1 month and 1 year are taking on all the risk of longer loans without the same return. It's us - the lenders - me included - that set the rates we are happy to lend to on the 1 month and 1 year market. That is why the rates are lower.
Personally I am happy getting around 3% on the 1 month market - given the risk to my money.
Of course I'd like a higher rate - but the reality is there are 1000's of lenders like me who are willing to lend at these rates given the risk.
I think the provision fund is great - in fact much stronger than I ever imaged back in 2010 when I signed up to ratesetter so I am comfortable with the risk.
Jloans yes OK the rates may be set by lenders for the one months and 1 year loans, but I think lenders need to get more clarity about the structure of the deal. From my understanding it works likes this. Borrower A borrows £10 for 5 years at 7% Ratesetter offers £10 on the 1 month market and it get's accepted at 3.0% to lender A. At month end Ratesetter looks for another 1 month lender and lends it at say 3.1% to lender B. Each month Ratesetter pockets the difference. This is fine, but it's not peer to peer lending, it is how a bank operates. The trouble comes in the following situation: Two years down the line let's just propose that ratesetter's coverage ratio has dived to 0.7, the provision fund is emptying and nobody wants to lend on ratesetter as due to haircuts from active management defaults are higher than the yield and there may soon be no provision fund to back any claims up. The lender in this month, let's call him lender C has got 3.1% for a month. He get's a message telling him that as nobody is lending on ratesetter he will be stuck with the loan at 3.1% until 3 years time. All this 3 years Ratesetter is still getting 7% but the poor lender is just getting 3%. To add insult to injury as there is not enough money in the provision fund to repay defaults in full the whole platform should be in active management, so the poor lender will probably get no interest (as this goes first) and may be getting a haircut to capital repayments. And poor lender C who thought he would get his £10 back in a month won't see it for 3 years! OK if you are happy with the rate and the above fine. But I for one don't think this is explained clearly. If there was ever any sign ratesetter was in trouble, nobody in their right mind (or anybody who actually understands how it works) would lend on the one month or one year market, as you take on all the risks and ratesetter creams off over half of the interest.
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jlend
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Post by jlend on Feb 22, 2015 19:38:08 GMT
It's us - the lenders - me included - that set the rates we are happy to lend to on the 1 month and 1 year market. That is why the rates are lower.
Personally I am happy getting around 3% on the 1 month market - given the risk to my money.
Of course I'd like a higher rate - but the reality is there are 1000's of lenders like me who are willing to lend at these rates given the risk.
I think the provision fund is great - in fact much stronger than I ever imaged back in 2010 when I signed up to ratesetter so I am comfortable with the risk.
Jloans yes OK the rates may be set by lenders for the one months and 1 year loans, but I think lenders need to get more clarity about the structure of the deal. From my understanding it works likes this. Borrower A borrows £10 for 5 years at 7% Ratesetter offers £10 on the 1 month market and it get's accepted at 3.0% to lender A. At month end Ratesetter looks for another 1 month lender and lends it at say 3.1% to lender B. Each month Ratesetter pockets the difference. This is fine, but it's not peer to peer lending, it is how a bank operates. The trouble comes in the following situation: Two years down the line let's just propose that ratesetter's coverage ratio has dived to 0.7, the provision fund is emptying and nobody wants to lend on ratesetter as due to haircuts from active management defaults are higher than the yield and there may soon be provision fund to back any claims up. The lender in this month, let's call him lender C has got 3.1% for a month. He get's a message telling him that as nobody is lending on ratesetter he will be stuck with the loan at 3.1% until 3 years time. All this 3 years Ratesetter is still getting 7% but the poor lender is just getting 3%. To add insult to injury as there is not enough money in the provision fund to repay defaults in full the whole platform should be in active management, so the poor lender will probably get no interest (as this goes first) and may be getting a haircut to capital repayments. And poor lender C who thought he would get his £10 back in a month won't see it for 3 years! OK if you are happy with the rate and the above fine. But I for one don't think this is explained clearly. If there was ever any sign ratesetter was in trouble, nobody in their right mind (or anybody who actually understands how it works) would lend on the one month or one year market, as you take on all the risks and ratesetter creams off over half of the interest. I am comfortable that I may loose some of the capital I lend via ratesetter and may not receive all the interest I expect.
I must admit I don't share your view that "....it's not peer to peer lending..." though. Every P2X platform is different. Ratesetter developed some innovative offerings including the 1 month and 1 year market, both of which I really like and have regularly used over the years.
I appreciate these markets don't meet your needs or appetite for risk though - and they won't be for everyone.
Ratesetter, and P2X lending in general is not risk free, and this needs to be clearly communicated at all times as you say.
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c88dnf
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Post by c88dnf on Feb 22, 2015 20:07:07 GMT
I've been pondering about this thread for a few days now. Comments re the Provision Fund evaporating I treat with a pinch (shovelfull) of salt, since available data over the past 3 months points to Ratesetter being able to adjust the Fund's level very efficiently.
On the other hand, as a lender I would rather like to know some basic data: 1) What percentage of the loan book is allocated to individual investors? 2) What percentage is allocated to business lenders? 3) Separately to (1) & (2), what percentage is allocated to either category, but against security based on property and at what loan to value ratio.
Note that I'm not making any judgements about which of those 3 categories is best or worst. Each has positive and negative attributes. Frankly, in many ways loans to individuals worry me more. Nor am I am in any way fazed about Ratesetter diversifying their portfolio: that seems prudent business sense to me. In depth and breadth, there is resilience.
For the record, my family's P2P investments are heavily skewed toward RS (over 80%) and I have absolutely no plans to change that any time soon.
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jlend
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Post by jlend on Feb 22, 2015 21:11:31 GMT
I've been pondering about this thread for a few days now. Comments re the Provision Fund evaporating I treat with a pinch (shovelfull) of salt, since available data over the past 3 months points to Ratesetter being able to adjust the Fund's level very efficiently. On the other hand, as a lender I would rather like to know some basic data: 1) What percentage of the loan book is allocated to individual investors? 2) What percentage is allocated to business lenders? 3) Separately to (1) & (2), what percentage is allocated to either category, but against security based on property and at what loan to value ratio. Note that I'm not making any judgements about which of those 3 categories is best or worst. Each has positive and negative attributes. Frankly, in many ways loans to individuals worry me more. Nor am I am in any way phased about Ratesetter diversifying their portfolio: that seems prudent business sense to me. In depth and breadth, there is resilience. For the record, my family's P2P investments are heavily skewed toward RS (over 80%) and I have absolutely no plans to change that any time soon. What we do know is at December 2014 as per the ratesetter blog as far as I can see - unless I have misunderstood.
There was £265m in outstanding loans
1. 83.4% was lent to individuals 2. 16.6% was lent to businesses 3. The business lending actually includes property - all of which is secured. This makes up 8.3% of lending
So your request sounds reasonable, perhaps we could have a monthly update.
Will you be emailing ratesetter to ask?
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c88dnf
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Post by c88dnf on Feb 23, 2015 1:09:56 GMT
(snip) as a lender I would rather like to know some basic data: 1) What percentage of the loan book is allocated to individual investors? 2) What percentage is allocated to business lenders? 3) Separately to (1) & (2), what percentage is allocated to either category, but against security based on property and at what loan to value ratio. What we do know is at December 2014 as per the ratesetter blog as far as I can see - unless I have misunderstood.
There was £265m in outstanding loans
1. 83.4% was lent to individuals 2. 16.6% was lent to businesses 3. The business lending actually includes property - all of which is secured. This makes up 8.3% of lending
So your request sounds reasonable, perhaps we could have a monthly update.
Will you be emailing ratesetter to ask?
Thanks jlend. I like to consider myself reasonable. A monthly checkpoint on the line of the Dec 17th blog article would be just fine by me, with the extra item added of loan-to-value. As to emailing, I consider raising the topic in this Forum quite sufficient. The good platforms pay attention to it....
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Post by westonkevRS on Feb 23, 2015 6:24:52 GMT
The blog was just the start, we do plan to provide more reporting and data on the portfolio breakdown (call it transparency if you will). Timing is just a matter of priorities, format, disclosure and automating the process. So stick with us....
Kevin.
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jonbvn
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Post by jonbvn on Feb 23, 2015 10:02:20 GMT
I've been pondering about this thread for a few days now. Comments re the Provision Fund evaporating I treat with a pinch (shovelfull) of salt, since available data over the past 3 months points to Ratesetter being able to adjust the Fund's level very efficiently. On the other hand, as a lender I would rather like to know some basic data: 1) What percentage of the loan book is allocated to individual investors? 2) What percentage is allocated to business lenders? 3) Separately to (1) & (2), what percentage is allocated to either category, but against security based on property and at what loan to value ratio. Note that I'm not making any judgements about which of those 3 categories is best or worst. Each has positive and negative attributes. Frankly, in many ways loans to individuals worry me more. Nor am I am in any way phased about Ratesetter diversifying their portfolio: that seems prudent business sense to me. In depth and breadth, there is resilience. For the record, my family's P2P investments are heavily skewed toward RS (over 80%) and I have absolutely no plans to change that any time soon. What we do know is at December 2014 as per the ratesetter blog as far as I can see - unless I have misunderstood.
There was £265m in outstanding loans
1. 83.4% was lent to individuals 2. 16.6% was lent to businesses 3. The business lending actually includes property - all of which is secured. This makes up 8.3% of lending
So your request sounds reasonable, perhaps we could have a monthly update.
Will you be emailing ratesetter to ask?
So for the property loans, if we assume an average 70% LTV we are looking a total exposure to property loans of 5.81% of the loan book. Even with 50% falls in property values/prices (how likely is that in the UK?) and all these secured loans defaulted the PF would still cover the shortfall.
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agent69
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Post by agent69 on Feb 23, 2015 13:55:19 GMT
At month end Ratesetter looks for another 1 month lender and lends it at say 3.1% to lender B.
I think this was the Northern Rock business model. Short term borrowing to pay off long term lending. Fine until the liquidity in the market dries up, and then the sticky brown stuff hits the fan.
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pip
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Post by pip on Feb 23, 2015 14:49:11 GMT
At month end Ratesetter looks for another 1 month lender and lends it at say 3.1% to lender B.
I think this was the Northern Rock business model. Short term borrowing to pay off long term lending. Fine until the liquidity in the market dries up, and then the sticky brown stuff hits the fan.
It would be nice to know what % of long term debt is being rolled over on a monthly basis. If it's a small amount, primarily used for people selling out their investments or where there is a timing difference between the length of loan and borrowing fine. If a significant proportion of the book is relying on monthly roll over then not so happy. As I have previously said my main issue is two-fold, from what I understand Ratesetter is creaming off the difference between the lender and the borrower rate for short term lenders and secondly a short term lender will be stuck on a low rate long term loan if the as you put it sticky stuff hits the fan. Let's say the rate on the monthly loans rises above the borrowers rate, which it could easily do if there was perceived a liquidity issue upcoming, would ratesetter swallow the loss on paying out the higher rate to the lender, or would it say, no even though there is a higher rate lender, as we will lose money on it we will not repay the previous lender until the loan expires? So many questions...
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spiral
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Post by spiral on Feb 23, 2015 15:48:58 GMT
I think this was the Northern Rock business model. Short term borrowing to pay off long term lending. Fine until the liquidity in the market dries up, and then the sticky brown stuff hits the fan.
Let's say the rate on the monthly loans rises above the borrowers rate, which it could easily do if there was perceived a liquidity issue upcoming, would ratesetter swallow the loss on paying out the higher rate to the lender Westonkev has previously said that RS take on the risk (profit or loss) on these loans. I suppose if liquidity really became an issue they would just stop issuing new short term loans thus reducing the demand each month as the existing loans repay. Market forces would then prevail bringing rates down to a more affordable level than if they kept adding to the stockpile.
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Post by Deleted on Feb 23, 2015 16:43:46 GMT
Hi all, Kev - I hope you don't mind me jumping in here due to time zones between UK and Oz, but just to let you all know that as of today both Zopa and RateSetter have published their individual loan books in partnership with AltFi Data following in the footsteps of our friends over at Funding Circle for improved transparency. These loan books aim to provide transparency across both platforms for you guys to analyse our lending history. Hope you find this useful Thanks, Mat www.altfi.com/data/indices/returnswww.altfi.com/news/776
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adrianc
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Post by adrianc on Feb 23, 2015 16:49:07 GMT
If anybody fancies avoiding the AltFi email address harvest, the direct download link is :- www.altfi.com/downloads/RateSetterLoanBook.csv (10Mb) Potted summary :- 86,000+ loans. 1160 are Business, the rest are Individual, going by "Borrower Type" column. Of those business loans, 150 are £50k-£100k, 220 are £100k+, 115 are £200k+. Of that 115, 100 are near-as-dammit £250k. Only three are ~£500k, and one is £1.5m. The smallest business loan is £89... Business loans total £75m. Of individual loans, 380 are £50k-£100k, 80 are £100k-£200k and 13 are 200k+ - one of which is £1.2m. The smallest is £23. The total is £406m. This is ALL loans - repaid, default and repaying.
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pip
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Post by pip on Feb 23, 2015 17:09:30 GMT
Hi all, Kev - I hope you don't mind me jumping in here due to time zones between UK and Oz, but just to let you all know that as of today both Zopa and RateSetter have published their individual loan books in partnership with AltFi Data following in the footsteps of our friends over at Funding Circle for improved transparency. These loan books aim to provide transparency across both platforms for you guys to analyse our lending history. Hope you find this useful Thanks, Mat www.altfi.com/data/indices/returnswww.altfi.com/news/776This is great, and to think I wasn't doing anything this evening I already see a few interesting things. Two loans over £1m, including one to an individual for £1.2m. £172m of the loans at the end of January are for above £25k, and I thought the max was £25k....of those £3.1m is late or defaulted (not too bad). I am going to pivot and play around with this data every way I can and come back with anything interesting.
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