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Post by cautious on Mar 17, 2015 18:12:00 GMT
When interest rates (eventually) start to rise will you adjust your P2P lending ?
As rates rise, some over extended borrowers will struggle to pay their mortgages and loans...... I expect that P2P will be at the bottom of their list of debt to pay.
It makes the platforms credit checks even more important; (although off course a borrower may have taken on more debt since applying for P2P funds), and will test any provision funds as defaults increase.
So when rates start to increase will you stop investing in, for example, 5yr RS and switch into shorter, or turn off auto re-investment altogether and start to withdraw funds....perhaps even sell out early.
Your thoughts please
Jon
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bugs4me
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Post by bugs4me on Mar 17, 2015 20:54:49 GMT
When interest rates (eventually) start to rise will you adjust your P2P lending ?
As rates rise, some over extended borrowers will struggle to pay their mortgages and loans...... I expect that P2P will be at the bottom of their list of debt to pay.
It makes the platforms credit checks even more important; (although off course a borrower may have taken on more debt since applying for P2P funds), and will test any provision funds as defaults increase.
So when rates start to increase will you stop investing in, for example, 5yr RS and switch into shorter, or turn off auto re-investment altogether and start to withdraw funds....perhaps even sell out early.
Your thoughts please
Jon
. All depends IMO where you are invested. Some of the passive P2P's - Z, RS, W, etc it would be better to simply let them run their course as the cost of an early exit or is it a panic exit can be prohibitive. Unlike Z, with RS you can adjust your reinvestment rate. My other P2P's are at a reasonable level anyway so they could just run their course. Simply withdrawing funds altogether creates another problem as you've then got idle money - what do you do with it? Crystal ball glazing on my part, I do not expect to see rates rising anytime soon and when they do it will probably be at a snails pace upwards. Any speedy upward trend would place enormous pressures on the currency exchange rate - something which all governments worldwide are eager to avoid unless they want to stop their exports dead.
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mikes1531
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Post by mikes1531 on Mar 17, 2015 23:35:32 GMT
I don't think I'd withdraw any of my investment, but I do think I'll think twice about the term I lend for, with less willingness to commit for 5-year fixed rates and more willingness to accept the slightly lower rates on shorter-term investments so that I could recycle repayments into the rising rates more quickly.
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Post by meledor on Mar 18, 2015 8:39:29 GMT
When interest rates rise... so could default rates. So there is a double whammy in terms of risk - interest rate risk, the more so for longer term lending, and heightened credit risk. The current situation has been quite forgiving of how a lot of lending has been priced. Maybe this won't be the case in the future. So I think people will become wiser and seek more compensation and security for the risks taken on.
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Post by davee39 on Mar 18, 2015 8:59:18 GMT
There are three potential game changers ahead of any rates rise.
1) P2P ISA's
2) Pension freedom
3) Institutions
P2P will see a fresh influx of money from pensions and ISA's. This could even lower rates in the short term but allows for continuing strengthening of the provision funds. I doubt rates will be above 2% by the end of 2016 and this might be accompanied by a slight improvement in living standards making the rates more affordable. Institutions will continue to increase their stakes - the first Investment Trust stands at a healthy premium as an attractive product to spread investment options among cash funds.
In any case where is there to go? The banks are unlikely to pass on any benefits from a rise in rates which are anyway rock bottom so it seems far too early to panic.
I see the biggest risks among the smallest high interest platforms which may be more vulnerable to market shocks and may not always have fully developed business plans.
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Post by batchoy on Mar 18, 2015 10:04:39 GMT
The question of interest rates is a difficult one since institutional rates for borrowers didn't follow the BoE Base Rate right the way down (if their hadn't been a BoE 1% cut off point in one of the mortgages I had in 2009 the institution would have been paying me money on a 0.75% below BoE Base Rate Tracker) so the question is at what point will Institutions start to track the BoE Base Rate again one the BoE start raising the rate.
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Post by Deleted on Mar 24, 2015 3:35:11 GMT
When interest rates (eventually) start to rise will you adjust your P2P lending ?
. No need to worry Jon. Interest rates can never rise, at least not by a meaningful amount. 50 basis points would probably trigger an immediate housing and stock market collapse, leading to immediate emergency reversal and perhaps overshoot into the negative, combined with mass monetary expansion. It's far more likely that interest rates will fall rather than rise. P2P lending will no doubt continue to expand the provision of household and business debt for some time yet!
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webwiz
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Post by webwiz on Mar 24, 2015 16:29:06 GMT
When interest rates (eventually) start to rise will you adjust your P2P lending ?
. No need to worry Jon. Interest rates can never rise, at least not by a meaningful amount. 50 basis points would probably trigger an immediate housing and stock market collapse, leading to immediate emergency reversal and perhaps overshoot into the negative, combined with mass monetary expansion. It's far more likely that interest rates will fall rather than rise. P2P lending will no doubt continue to expand the provision of household and business debt for some time yet! Never say never.
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Post by Deleted on Mar 25, 2015 2:23:35 GMT
What do you think a 3% base rate would look like in the context of 2015 Britain with regard to equities, p2p, real estate, rents, employment, consumer debt, government debt and treasury bonds including pensioner bonds?
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jonno
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nil satis nisi optimum
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Post by jonno on Mar 25, 2015 10:28:08 GMT
@rupaul: Do you use Tarot, Crystal, or just join hands to contact the living?
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Liz
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Post by Liz on Mar 25, 2015 10:50:28 GMT
What do you think a 3% base rate would look like in the context of 2015 Britain with regard to equities, p2p, real estate, rents, employment, consumer debt, government debt and treasury bonds including pensioner bonds? 3% is historically very low.
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ilmoro
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'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 Mar 25, 2015 11:16:56 GMT
@rupaul: Do you use Tarot, Crystal, or just join hands to contact the living? Ouija? Im sure the dead have some useful insights 
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jonno
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nil satis nisi optimum
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Post by jonno on Mar 25, 2015 11:31:07 GMT
@rupaul: Do you use Tarot, Crystal, or just join hands to contact the living? Ouija? Im sure the dead have some useful insights Well, I suppose that would strike a happy medium 
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Post by batchoy on Mar 25, 2015 12:17:13 GMT
What do you think a 3% base rate would look like in the context of 2015 Britain with regard to equities, p2p, real estate, rents, employment, consumer debt, government debt and treasury bonds including pensioner bonds? 3% is historically very low. It depends on how far you want to go back. From 1694 through to the 1960s 3% to 5% was relatively common only from the late 1960's did the rates go consistently above 5% and into double digits.
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mikes1531
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Post by mikes1531 on Mar 25, 2015 12:59:51 GMT
What do you think a 3% base rate would look like in the context of 2015 Britain with regard to equities, p2p, real estate, rents, employment, consumer debt, government debt and treasury bonds including pensioner bonds? 3% is historically very low. Then again, so is six years of 0.5%. Perhaps the folks who say "This time it's different" will be right for once.
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