fasty
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Post by fasty on Mar 18, 2015 22:53:42 GMT
Yes, I'm pleased to see FC encouraging the game of 'screw the Autobidders' by having some skin in that game, rather than just leaving it to flippers and dumpers. Cash back is too good for Autobidders, they don't even know they are getting it. It's wasted on them, really. Your standards are slipping, soon you'll be as ruthless as the rest of us. Indeed, the covetous green creature is evidently rubbing its paws. I'm perfectly happy with autobid just as it is though. Most (non-financial) people I speak bemoan the 1% or thereabouts that they're getting from their bank or building society savings accounts and are thrilled at the idea of (say) 5% nett that autobid will give you without any effort. So that's all fine. There's space for me to put in a bit of effort and get my 12%, then the autobidders can fill the rest at MBR if they want and be happy with their 5%, and the borrower is happy too because the average rate remains quite low. Everyone's happy. What's not to like?
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blender
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Post by blender on Mar 18, 2015 23:47:28 GMT
Well, if you can't beat them, change your colour to blend in. Irony is perhaps wasted on flippers. I admit to doing some flipping and dumping unwanted loan parts (reminds me of the confessional Monty Python 'The mouse problem' sketch - I've done a bit of cheese). I decided long ago that if you play the FC online game, altruism has no place, and you get what you can within the rules - that is how it is supposed to work. That's why I do not complain of he with enhanced stature - flippers in glass houses etc. That's how FC, driven by venture capital, will work - its not a charity or mutual.
GSV points out, I believe, that by saving the cash back for the later tranches, when Autobidders are spent, in order to incentivise manual bidders as underwriters, FC may effectively be taking advantage of Autobidders ignorance and blind faith by giving them a worse deal on the property loans. (Correct me if wrong, GSV). That's our job!
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Post by GSV3MIaC on Mar 19, 2015 9:02:36 GMT
Yep, Financial Clout are clearly not believers in 'fair' (I.e. same) deal for all. Maybe the market can't stand it, but I still think all lenders on a loan should get the same rate and the same cash back, irrespective of the depth of their pockets, their ability to mouse push at the last minute, or their bot writing skills.
No, that doesn't make me a communist! 8>.
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Post by Deleted on Mar 19, 2015 9:12:40 GMT
I see two trends 1) Property type loans where they are aiming for 7% interest only with no splashback over 18 months. Clearly they are struggling to get there but will keep trying, that must hit a price point with the borrowers. 2) Other types of loans with fixed interest at about 10%, this is a new thing (for me) not sure where this is leading but assuming A+ this nets out at 8.4%. I suspect, if this gains any traction this will drive down to about 8% net. For FC to keep growing it needs to do this sort of thing. I just hope that new P2P players keep joining and keep finding new niches to open to us to access nets in the area of 11%+. But keep me away from aircraft  |
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sl75
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Post by sl75 on Mar 19, 2015 13:22:51 GMT
Yep, Financial Clout are clearly not believers in 'fair' (I.e. same) deal for all. Maybe the market can't stand it, but I still think all lenders on a loan should get the same rate and the same cash back, irrespective of the depth of their pockets, their ability to mouse push at the last minute, or their bot writing skills. No, that doesn, make me a communist! 8>. If you're going to go down that route, I don't really see why such "fairness" should be limited in scope to a single loan... Zopa and Wellesley's current products, and Assetz Capital's GEIA (and other yet-to-launch funds) provide the ultimate in fairness by this interpretation - no "strategy" will outperform the rate that everyone else is getting, as it's the same rate for everyone. The only advantage over a traditional savings product is the higher expected return. Maybe such demands for "fair" will ultimately lead all P2P providers down a similar route? I'd rather hope not... For me, the "fairness" is in the structure of the market, which allows all investors, small or large, similar access to the marketplace. A £1,000,000 investor pays the exact same 1% annual fee and 0.25% selling fee as a £100 investor, so everyone can compete on equal terms in the marketplace with the same information on which to make decisions available to all. What seems to me "unfair" at FC is the information advantage given to late bidders over early bidders about what everyone else has bid. There are a number of ways to resolve that, of which your preferred mechanism (force all bids to be increased to the maximum rate) is only one. Other methods include hiding bids from other users until the auction is over (so that nobody can intentionally sneak in and undercut the top rate by 0.1% with a few seconds to go, as nobody knows what that top rate actually is), or using first-come-first-served fixed rate auctions exclusively.
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Post by GSV3MIaC on Mar 19, 2015 14:11:40 GMT
The problem I have with fixed rate 'auctions' (as the only option) is that there is no market force involved in setting the rate, beyond the simple binary 'will I buy it yes/no' one. I'd like the option of 'yes, I'll buy it, but only at x% or better'. I guess they can keep coming back with ever increasing fixed rate offers until it fills, but that seems like a retrograde step over a real time auction. ZOPA, Wellesley etc seem to be to be just modified banks with no security and better rates. RS I like better, although I liked the (original) ZOPA model(s) better yet.
To get a good deal (or maybe I should say 'the best deal') on FC you need to be the at the end of an auction (or your bot does), with, as you say, information on what is being bid. If the bid steps were bigger you could probably arrive at the right answer sooner, but with 0.1% (or 0.001% or whatever) it's last bidder wins .. early bidders, and autobidders, stand little chance of getting the best rate (although they may get something they are happy with).
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blender
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Post by blender on Mar 19, 2015 15:51:40 GMT
The problem I have with fixed rate 'auctions' (as the only option) is that there is no market force involved in setting the rate, beyond the simple binary 'will I buy it yes/no' one. ... Other than the competition between FC+lenders and all the other lenders available to the borrower?
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Post by GSV3MIaC on Mar 19, 2015 19:17:00 GMT
That might drive the FC rates down, I doubt it'd drive the FC rate up .. compare FC property loans with those elsewhere for instance. I'd bid on quite a lot of the FC property loans, but not at the rates /cashbacks they currently choose to offer me. Be interesting, as someone suggested elsewhere, to see what %age of the interest/fees collected from the borrower end up with FC, vs what ends up with the lenders?
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blender
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Post by blender on Mar 19, 2015 23:28:29 GMT
That might drive the FC rates down, I doubt it'd drive the FC rate up .. compare FC property loans with those elsewhere for instance. I'd bid on quite a lot of the FC property loans, but not at the rates /cashbacks they currently choose to offer me. Be interesting, as someone suggested elsewhere, to see what %age of the interest/fees collected from the borrower end up with FC, vs what ends up with the lenders? None of the interest ends up with FC. For the fixed-rate interest-only property loans the FC fee is 5% of the loan amount (large asset fee) from the borrower, plus 1% per annum from the lenders. Out of the borrower fee FC have to pay the professional fees and any cash back. So the cost of a property loan to the borrower depends on the term, for 12 months term loans, A+ 13% going up to B 17% (of which FC get 6% less cash back and any fee discount). Longer term, lower APR. Someone could do the sums for the loans to date, except that FC can reduce the 5% fee and we would not know (I doubt they did much of that with 2% cash back). To do it roughly, if borrowers have taken £30M through FC (their figure), then FC may have received a bit over 2% gross profit, say £700k, before all the costs of the property team and other apportioned overheads to date. So not very exciting, so far. (The net profit may be similar to the amount of property loans taken onto the balance sheet).
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Post by GSV3MIaC on Mar 20, 2015 16:12:28 GMT
Hmm looks like 11582 is headed for a watery grave (and that was just tranche 1) .. no sign of FC Property Bailouts Inc reaching for their mouses ..
Blender - just a straight 5% upfront?! (and 1% ongoing) .. sounds positively generous, except on a 12 month loan at 8%, with no cashback, that's 6% for FC and 7% for me. They do more work .. I take all the risk. I guess they also get the interest on the withheld interest, but I'm prepared to ignore that. 8>.
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blender
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Post by blender on Mar 20, 2015 16:31:04 GMT
With cash back it doesn't work for them, without cash back it doesn't work for us. Cash back in any case can only be a short term promotional incentive.
Basically it does not look good, and it comes from trying to use an existing platform, and captive Autobidders, to fund a type of loan for which the existing platform was not designed and its not suited. I would be considering ditching the organic growth route in favour of an inorganic growth route, without wishing to be more specific.
(BTW. They also get the interest on the loan parts they have had to buy.)
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Post by GSV3MIaC on Mar 20, 2015 16:42:27 GMT
The appear to have a mismatch - they have A) mega£ institutional funds chasing an investment and b) Mega£ property loan requests needing funding, but A doesn't want B (and who can blame them at the current offered terms, and with the alternative ability to cherry-pick whole loans at will). Time for some repackaging into 8% 1 or 2-year bonds (with protection fund) to flog to Granny?
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sl75
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Post by sl75 on Mar 20, 2015 18:40:06 GMT
Time for some repackaging into 8% 1 or 2-year bonds (with protection fund) to flog to Granny? If you're starting with 8% loans that have a 1% fee deducted, and carry a non-zero risk of loss of capital, you can't "repackage" them into an 8% bond with a protection fund... the bond would necessarily have a rather lower rate than the initial investment on which it is based. Something that can be repacked into an 8% bond for Granny could just as easily be packaged as a 9% or 10% loan (instead of the current 8%), and would then probably get enough bidders to fill at least the first tranche...
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Post by GSV3MIaC on Mar 20, 2015 19:12:37 GMT
I was sort of assuming they would roll in at least some of the cashback .. but OK, make it a 7% bond for Granny then, or even 6% .. that'd still probably sell fairly well, in larger chuncks that the autobidders are currently willing to swoop on. And I don't think we need zero risk .. just the RS 'nobody has lost a penny so far' model.
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Post by GSV3MIaC on Mar 20, 2015 19:23:17 GMT
8% with a PF, hmm, might work. Although I remember Samir in a vlog stating quite emphatically that they would never go the PF route and as they have large backers, I think his hands will be tied regarding a change of tack. Samir has been keeping a low profile of late afaict, and 'changing tack' doesn't seem an issue for FC in general (Reducing cashback on property loans? FCSL getting involved in tranche1? Releasing an API? Putting the financials back in the loanbook, to name but the first few I thought of). But yeah, the ability to offset losses ('eventually' .. like still a year away) does mitigate the need for a PF to help the taxation position, but selling it to granny is still going to be easier with a PF (unless you can get the full FSCS coverage) IMO. But hey, I'm not FC's marketing wizard. 8>. Like you, I ain't going to bite very hard, if at all, at 7 or 8%. 'Secured' is very nice, but a quick stroll over to AC will demonstrate that getting the 'security' turned back into ready cash is not quite as simple as selling a FTSE100 share. 8>.
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