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GBBA
Aug 6, 2015 16:42:43 GMT
Post by chris on Aug 6, 2015 16:42:43 GMT
You've read it right but typically loans that don't feature interest repayments are shorter term loans, and whilst they're not producing monthly repayments they're still giving a monthly return in accrued interest. So what happens if an investment includes some of these loans but the investor, for whatever reason, decides to dispose of their entire GBBA holding, do they loose out completely on that segment of interest Nope, same as with any other investment mechanism. You'll have your capital returned as soon as you sell and then you'll be paid any interest that had accrued when the borrower makes the interest payment.
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paulgul
Member of DD Central
Posts: 401
Likes: 92
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GBBA
Aug 6, 2015 17:11:42 GMT
chris likes this
Post by paulgul on Aug 6, 2015 17:11:42 GMT
Ok, thanks to both Stuart and Chris - worth a go then  |
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shimself
Member of DD Central
Posts: 2,563 
Likes: 1,171
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Post by shimself on Aug 7, 2015 21:10:25 GMT
Is there some way of establishing what my holdings actually are, I really can't be bothered wading through bought 0.02 sold 1.00 etc?
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upland
Member of DD Central
Posts: 479
Likes: 175
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GBBA
Aug 8, 2015 7:48:17 GMT
Post by upland on Aug 8, 2015 7:48:17 GMT
Agree , I would be interested too. The furious logs that it produces leave me cold.
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GBBA
Aug 8, 2015 8:38:22 GMT
Post by oldnick on Aug 8, 2015 8:38:22 GMT
Thinking ahead chris, to some future point in time when general interest rates have moved significantly above today's norm, how will the headline rate of 7% be adapted to reflect the (presumably) higher rates at which AC loans will be set. Will the same fund gradually offer a higher percentage as older cheaper loans naturally fall out of the account, or will there perhaps be a line drawn under them and a new fund started at a different headline rate? |
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jonah
Member of DD Central
Posts: 2,031
Likes: 1,113
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GBBA
Aug 8, 2015 8:52:24 GMT
Post by jonah on Aug 8, 2015 8:52:24 GMT
Thinking ahead chris, to some future point in time when general interest rates have moved significantly above today's norm, how will the headline rate of 7% be adapted to reflect the (presumably) higher rates at which AC loans will be set. Will the same fund gradually offer a higher percentage as older cheaper loans naturally fall out of the account, or will there perhaps be a line drawn under them and a new fund started at a different headline rate? I thought (dreamt? Read on here?) that that was the reason for the series 1 part, to let Ac do another version which was basically the same but at a different rate of return.
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Post by oldnick on Aug 8, 2015 9:11:29 GMT
Thinking ahead chris, to some future point in time when general interest rates have moved significantly above today's norm, how will the headline rate of 7% be adapted to reflect the (presumably) higher rates at which AC loans will be set. Will the same fund gradually offer a higher percentage as older cheaper loans naturally fall out of the account, or will there perhaps be a line drawn under them and a new fund started at a different headline rate? I thought (dreamt? Read on here?) that that was the reason for the series 1 part, to let Ac do another version which was basically the same but at a different rate of return. If a higher rate series 2 was offered, there would surely be an unseemly rush for the exit on series 1 and some sore losers who didn't react in time, for what ever reason - on holiday,asleep,too busy,etc. Series 1 punters would effectively be locked in for the remaining life of the loans it contained. This is a risk that we all accept, given that p2p is not like a bank deposit account, but, nonetheless, I suspect there is an expectation of a degree of liquidity with this new account. Wouldn't be kinder to all if the rate gradually changed to reflect the average interest rate of older and newer loans?
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GBBA
Aug 8, 2015 9:32:15 GMT
Post by chielamangus on Aug 8, 2015 9:32:15 GMT
Thinking ahead chris, to some future point in time when general interest rates have moved significantly above today's norm, how will the headline rate of 7% be adapted to reflect the (presumably) higher rates at which AC loans will be set. Will the same fund gradually offer a higher percentage as older cheaper loans naturally fall out of the account, or will there perhaps be a line drawn under them and a new fund started at a different headline rate? Why should future rates be "(presumably) higher". I would argue that a more traditional level of interest rates in the banking sector with more traditional levels of lending would actually cut into the P2P sector. At the margin, some who currently opt for the P2P route will revert to their banks. Instead of the two-market solution which we have at present, the markets would probably coalesce, and differences in interest rates and availability of funds between the Banks and the P2P sector would decline. Anybody else out there agree?
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GBBA
Aug 8, 2015 10:23:51 GMT
Post by pepperpot on Aug 8, 2015 10:23:51 GMT
I thought (dreamt? Read on here?) that that was the reason for the series 1 part, to let Ac do another version which was basically the same but at a different rate of return. If a higher rate series 2 was offered, there would surely be an unseemly rush for the exit on series 1 and some sore losers who didn't react in time, for what ever reason - on holiday,asleep,too busy,etc. Series 1 punters would effectively be locked in for the remaining life of the loans it contained. This is a risk that we all accept, given that p2p is not like a bank deposit account, but, nonetheless, I suspect there is an expectation of a degree of liquidity with this new account. Wouldn't be kinder to all if the rate gradually changed to reflect the average interest rate of older and newer loans? Don't forget loans sold from within GBBA can be bought by MLIA targets, I doubt liquidity would be an issue if/when rates finally move significantly, as long as P2P in general is still attractive. Who knows, they may even be bought by GBBA2 at 8%. 
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GBBA
Aug 8, 2015 11:16:21 GMT
Post by chris on Aug 8, 2015 11:16:21 GMT
oldnick - You're asking the IT guy, haven't a clue. In theory the rate of return to lenders could be changed easily, also the minimum rate paid by the loans accepted into the account could be changed very easily and the system would just list any loans that no longer matched the criteria for sale, buying into new loans that meet the new criteria. Whilst that could technically be implemented without issuing a series 2 account I'd be surprised if we did so unless the changes were very small and to the lenders benefit. If we wanted to avoid a series 2 account we could just as easily release a separate investment account at a higher rate. Lenders would then be free to choose between the two with liquidity determining which is the better bet. No good demanding 15% returns if there are no quality borrowers willing to pay it, for example.
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bigfoot12
Member of DD Central
Posts: 1,817
Likes: 816
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GBBA
Aug 8, 2015 17:36:02 GMT
Post by bigfoot12 on Aug 8, 2015 17:36:02 GMT
If a higher rate series 2 was offered, there would surely be an unseemly rush for the exit on series 1 ... Series 1 punters would effectively be locked in for the remaining life of the loans it contained... I think that would probably have happened before the series 2 was offered. If rates have climbed so that the typical loan has moved from 10% to 12% then lenders are not going to be buying the older loans at par.
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duck
Member of DD Central
Posts: 2,880
Likes: 6,960
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GBBA
Aug 9, 2015 4:18:27 GMT
Post by duck on Aug 9, 2015 4:18:27 GMT
Is there some way of establishing what my holdings actually are, I really can't be bothered wading through bought 0.02 sold 1.00 etc? I built a spreadsheet for my partners account that produces headline amounts per loan. 'Dumping' sheet for the downloaded info and then word search for loan name. Only took 20 minutes to set up.
OK it will 'fall over' if a new loan is added but that takes seconds to add a new column and 'IF' statement.
Why do I need this info? Well I have manual investments in some of the loans (personal and business) and IMO whilst knowing total loan exposure is 'information', for liquidity purposes it is good to know what loans are being invested in by the GBBA.
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GBBA
Aug 9, 2015 8:36:48 GMT
Post by oldnick on Aug 9, 2015 8:36:48 GMT
oldnick - You're asking the IT guy, haven't a clue. In theory the rate of return to lenders could be changed easily, also the minimum rate paid by the loans accepted into the account could be changed very easily and the system would just list any loans that no longer matched the criteria for sale, buying into new loans that meet the new criteria. Whilst that could technically be implemented without issuing a series 2 account I'd be surprised if we did so unless the changes were very small and to the lenders benefit. If we wanted to avoid a series 2 account we could just as easily release a separate investment account at a higher rate. Lenders would then be free to choose between the two with liquidity determining which is the better bet. No good demanding 15% returns if there are no quality borrowers willing to pay it, for example. I think what is really going through my head is that the two fixed interest accounts are priced according to the rates available from AC loans now on the market. How will they be affected by average AC loan rates rising or falling? If the accounts maintain the current target rates, falling rates on new AC loans will squeeze contributions to the Provision Funds, and rising rates overfill them. In the first scenario, of falling rates for new AC loans, you're suggesting that at a certain level those new loans wouldn't offer a high enough margin to feed the PF and would not be included - so the 7% account might decline naturally as the loans it already held were repaid. In the second scenario of rising rates for new AC loans, the PF would reach its target capacity sooner - what then for the extra margin generated? If there aren't many lenders investing through these accounts as well as manually, there may be little immediate pressure for AC to share the excess by raising the target rates of the accounts. Pressure from comparison with competing PF type platforms maybe, but not necessarily from direct comparison with the rate manual investing in AC could achieve. As a future small shareholder in AC I don't have a problem here, as profits for the company are good news, and I'm free to invest manually or automatically as I see fit. It's just that the 'what ifs' always go through my mind when a constraint or pivot point is applied to a system.
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GBBA
Aug 9, 2015 9:06:18 GMT
Post by stuartassetzcapital on Aug 9, 2015 9:06:18 GMT
If a higher rate series 2 was offered, there would surely be an unseemly rush for the exit on series 1 and some sore losers who didn't react in time, for what ever reason - on holiday,asleep,too busy,etc. Series 1 punters would effectively be locked in for the remaining life of the loans it contained. This is a risk that we all accept, given that p2p is not like a bank deposit account, but, nonetheless, I suspect there is an expectation of a degree of liquidity with this new account. Wouldn't be kinder to all if the rate gradually changed to reflect the average interest rate of older and newer loans? Don't forget loans sold from within GBBA can be bought by MLIA targets, I doubt liquidity would be an issue if/when rates finally move significantly, as long as P2P in general is still attractive. Who knows, they may even be bought by GBBA2 at 8%. @pepperpotand all, yes a new series account would be opened to handle any material increase in rates but as you say the MILA is expected to soak up any sales but then again so would a new series at a slightly higher rate as higher funded provision fund levels could justify a tighter margin for diversion to the provision fund. However, firstly, given the BOE has indicated that base rates will rise very slowly over an extended period and that they think 2%+ is the new (long term base rate of) 5% (my own view has always been 3% but not a lot of difference) and secondly that bank profit margins (which are designed to be somewhat excessive at the moment to assist with recapitalisation of their balance sheets) would fall and partially / fully absord such a small base rate rise meaning that payable rates by businesses may not rise much. Overall even if it happened, strongly rising base rates indicate the attempted reigning in of a booming economy and minimal defaults as a result and should not be taken as an immediate threat in most reasonable scenarios. As always hard to analyse in advance but we try, as everyone else does.
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GBBA
Aug 9, 2015 9:09:25 GMT
Post by stuartassetzcapital on Aug 9, 2015 9:09:25 GMT
Thinking ahead chris, to some future point in time when general interest rates have moved significantly above today's norm, how will the headline rate of 7% be adapted to reflect the (presumably) higher rates at which AC loans will be set. Will the same fund gradually offer a higher percentage as older cheaper loans naturally fall out of the account, or will there perhaps be a line drawn under them and a new fund started at a different headline rate? Why should future rates be "(presumably) higher". I would argue that a more traditional level of interest rates in the banking sector with more traditional levels of lending would actually cut into the P2P sector. At the margin, some who currently opt for the P2P route will revert to their banks. Instead of the two-market solution which we have at present, the markets would probably coalesce, and differences in interest rates and availability of funds between the Banks and the P2P sector would decline. Anybody else out there agree? Very complicated scenario planning however the bank's capital requirements for SME lending makes it much less likely they can profit well from returning to the sector directly than say the less onerous consumer lending sector. Secondly once this period has allowed the main p2p players to get scale they will be much lower cost to operate meaning their Net Interest Margin (NIM) can be tighter than any normal bank meaning higher savings rates and lower borrower rates at any base rate level.
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