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Post by contangoandcash on Aug 1, 2015 19:28:27 GMT
Does anyone have an opinion on whether the rates on markets such as RS will rise as and when the bank begin to raise interest rates? I don't suppose there is much data relating to this at all since rates have been so low for so long. I has seemed recently that rates have been rising slightly due to talk of it happening later in the year / early next.. but maybe coincidental.
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Post by westonkevRS on Aug 1, 2015 19:59:02 GMT
Does anyone have an opinion on whether the rates on markets such as RS will rise as and when the bank begin to raise interest rates? I don't suppose there is much data relating to this at all since rates have been so low for so long. I has seemed recently that rates have been rising slightly due to talk of it happening later in the year / early next.. but maybe coincidental. RateSetter does have the ambition that our rates are reflective of the cost of money in the wider macro economic environment. Perhaps a lead indicator of the other rates such as inflation, Libor and BoE base rates. Perhaps an overly lofty ambition, but there you go. Marketing like to call this vision the "peoples rate", especially the monthly money. One day you'll be quoted tracker loans or mortgages as "x% over the RateSetter rate", maybe even by other companies! However there isn't really the required level of liquidity right now as the rates do change with other influences - cash back, lender advertising, borrower deal flow, etc. I'd like it if the rates did move in expectation of wider rate rises, but there is too much noise now. However there are 24,000 active lenders and always a few £mill on the markets, so one day...
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sl75
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Post by sl75 on Aug 1, 2015 23:31:19 GMT
... One day you'll be quoted tracker loans or mortgages as "x% over the RateSetter rate", maybe even by other companies! I'd hope not - could lead to situations similar to the one with LIBOR, where huge amounts of business end up linked to rates with comparatively little volume of actual lending, making it ripe for manipulation. "Hey Fred, can you drop a couple of mill into RateSetter to move their rate down, so that we can cash in on this billion pounds worth of futures contracts?"
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Post by westonkevRS on Aug 2, 2015 8:13:25 GMT
Be fair, I did say there was a lack of liquidity.
This is a long term ambition. But either way, 24,000 active lenders is arguably better than a committee of 9 driven by political requirements or some dodgy bank traders manipulating for personal bonuses.
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trevor
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Post by trevor on Aug 2, 2015 15:28:03 GMT
For what it's worth my opinion is that short term the major effect on RS rates will be their cash back offerings, I am invested in 5 yr and was able to get 6.7% before the latest cash back offer produced a circa 1% reduction & the p2p ISA starting next year. Giving p2p ISA credibility will bring in a wall of money from savers currently earning rubbish rates in their conventional savings ISA's with a reduction in rates for RS lenders. Raising the BOE base rate 0.25% or 0.5% in a year will have a negligible affect. I have noticed that the major newspaper personal money pages carry little p2p advertising but I would expect that to change when they can offer ISA's.
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jonah
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Post by jonah on Aug 2, 2015 18:13:23 GMT
For what it's worth my opinion is that short term the major effect on RS rates will be their cash back offerings, I am invested in 5 yr and was able to get 6.7% before the latest cash back offer produced a circa 1% reduction & the p2p ISA starting next year. Giving p2p ISA credibility will bring in a wall of money from savers currently earning rubbish rates in their conventional savings ISA's with a reduction in rates for RS lenders. Raising the BOE base rate 0.25% or 0.5% in a year will have a negligible affect. I have noticed that the major newspaper personal money pages carry little p2p advertising but I would expect that to change when they can offer ISA's. Sadly I expect that this will be the case.
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spiral
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Post by spiral on Aug 3, 2015 9:19:57 GMT
Giving p2p ISA credibility will bring in a wall of money from savers currently earning rubbish rates in their conventional savings ISA's with a reduction in rates for RS lenders. I'm still not convinced by this. If people are happy to accept sub 2% rates (tax free in ISA's) from their B/S now and not take 6%ish before tax from P2P, why will they change this approach when the 6%ish is available in an ISA? It may well get an influx from those of us that are already part of the P2P community but there may be charges to consider which may wipe out some of the advantage. Also from next year, the first £1000 of savings interest will be tax free so that would permit ~20K in RS before you'd even need to consider an ISA.
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Post by davee39 on Aug 3, 2015 9:51:28 GMT
Giving p2p ISA credibility will bring in a wall of money from savers currently earning rubbish rates in their conventional savings ISA's with a reduction in rates for RS lenders. I'm still not convinced by this. If people are happy to accept sub 2% rates (tax free in ISA's) from their B/S now and not take 6%ish before tax from P2P, why will they change this approach when the 6%ish is available in an ISA? It may well get an influx from those of us that are already part of the P2P community but there may be charges to consider which may wipe out some of the advantage. Also from next year, the first £1000 of savings interest will be tax free so that would permit ~20K in RS before you'd even need to consider an ISA. Marketing! 6% Tax Free will be heavily promoted. The addition of P2P to ISA's will also look like a degree of government approval. As P2P grows (Zopa will soon be promoting £1 billion in loans) the lack of FSCS protection will be less of an issue with cautious savers. Rates are governed by the cheap money available to Banks, as Banks are forced to increase reserves and savers continue to look for better returns, there will be a end to the bargain basement 3.5% 5yr loans. I am still happy to take 6% over 5 years.
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Post by p2plender on Aug 3, 2015 12:40:09 GMT
3.5% lending is as morally wrong as the payday rates on offer. People whould not be able to borrow at such ridiculously low rates. Is their anywhere cheaper than Britain to borrow money for a personal loan?? No wonder the country is so heavily indebted on a personal level.
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Post by Deleted on Aug 3, 2015 13:45:50 GMT
I suspect that a fair bit of ISA money has been put in and ignored for many years now. Lack of training in financial matters have ensured that people will happily earn low interest without paying tax while inflation eats the value. The biggest danger to rates is institutions bringing in money and it may well be that one of the institutions brings in a load of ISA money.
If interest rates rise I will be worried because it harbinges the arrival of inflation increases, which destroys capital.
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Post by westonkevRS on Aug 5, 2015 15:46:12 GMT
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duck
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Post by duck on Aug 6, 2015 6:15:03 GMT
3.5% lending is as morally wrong as the payday rates on offer. People whould not be able to borrow at such ridiculously low rates. Is their anywhere cheaper than Britain to borrow money for a personal loan?? No wonder the country is so heavily indebted on a personal level. As of yesterday I could have taken a 2 year mortgage (40% equity + fees) at 1.75% even though the best offers have been disappearing in the last couple of weeks. Now that is what I call scary ..... when I had mortgages sub double figures was 'a bit of a result'.
My High Street bank has been pushing me to take a sub 3% personal loan and my business has been offered (on many occasions) cheap money even though it is 'cash rich'.
Add in the shorting of RBS shares which had a negative effect on the sale price a couple of days ago and I have to think the financial system in this country is still far from fixed.
The BoE rate is a big headline but IMO with the 'forward guidance' of the possibility of a couple of % in the next 3-5 years I don't see it having a major effect at home (especially since we appear to be tracking the US) .......... but on the exchange rate a rise in BoE rate will further strengthen the £ and make exports even less competitive.
To me UK plc looks to be in a bad place ........... no doubt the politicians will go for another housing boom to make 'us' feel better .......
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gnasher
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Post by gnasher on Aug 6, 2015 9:09:59 GMT
One day you'll be quoted tracker loans or mortgages as "x% over the RateSetter rate", maybe even by other companies! What the heck is the " RateSetter rate" when they often vary by up to 1% within 24 hours? Both monthly and 3 yr have been up and down like a yo-yo today. If anything like that is to ever happen the current volatility will need to calm down a lot.
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Post by nickthefool on Aug 6, 2015 9:42:43 GMT
One day you'll be quoted tracker loans or mortgages as "x% over the RateSetter rate", maybe even by other companies! What the heck is the " RateSetter rate" when they often vary by up to 1% within 24 hours? Both monthly and 3 yr have been up and down like a yo-yo today. If anything like that is to ever happen the current volatility will need to calm down a lot. Taking a monthly average, for example, would solve the volatility problem for the most part. Depends how much volatility you want, for mortgages even 0.1% makes a significant difference to how much you pay. Monthly averages of market rate in the 5 year market since the start of 2013 vary by 1.5%, but there's been a general increase in rates over that period too. The volatility in the calendar years of 2013 and 2014 was below 1% in both cases.
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spiral
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Post by spiral on Aug 6, 2015 10:51:53 GMT
Taking a monthly average, for example, would solve the volatility problem for the most part. I think part of the problem with the volatility is caused by the new MR and YR setting. It is skews the rate towards the lower end of the days trading range. Prior to the change, it skewed it towards the upper end which obviously didn't suit RS. Although less than happy with the current situation, we have to live with it. The main thing I don't like is that todays MR offers feed into tomorrows calculation which because of the skewing, keeps rates lower. I think MR should only be calculated using manually placed offers (probably excluding YR offers too or at least those set over 7 days ago) as these are the only truly active offers as opposed to passive.
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