The shape of things to come

I'm now reconsidering my thinking that it was "unlikely to have any material effect on anybody".  If they were told the prospective rates too (or could accurately predict what they were likely to be), anybody who got advance notice of this could have benefited from expected moves in the SM, whether it's offloading stuff they don't want, or picking up things on the cheap that could be sold at a premium once the new regime was in place.

Good luck trying to shift 12 month A+ loans at 6% (5% after fees).

I presume that prices will continue to be set by the sellers. 

One possibly unintended consequence is that, even after the adjustment to the new regime has finished, the return (before bad debt) on older loans with less than 12 months left to run will be better than that on new loans.

During the transition period it seems to me that it is likely that there will be lots of loans available on the secondary market at rates above the new fixed rates. It's as well (for FC) that autobid will not be buying loans at a premium, as otherwise funds for new loans on the primary market might dry up.

I simply deducted FC's 1% fee and projected bad debts by risk band

Hello Forum,

I think that FC have made the changes with regards to the innovative ISA options coming in.

Realistically with more money hitting the market, rates will fall once this is introduced. I can understand why the changes have been made if they felt the flow of money would send levels towards the MBR.

From my thinking the market has just been made efficient more quickly (at the cost of making it incredibly illiquid). A lot of us have profited from the market being inefficient on the SM. Unfortunately the good times don't last forever.

FC have been quite fair with the 18.1% rate to let those holding E rated loans to get out of the market. I'm pulling all my loan parts on the SM, apart from property loans, and will hold for a few months to see if I can sell at a greater premium.

My main concern, which will not affect me, is that the risk assumed will no longer be adequately priced. The money players in the auction process DO help to set benchmarks based on their perception of value. No liquidity (once the asset is held) and price controls never end well.

In addition I'm worried about the extent that loans will become correlated. I'm not for one moment suggesting that the standards at FC are akin to the rating agencies valuing CDOs, but if Autobid blind money continues to fill up loans at mandated prices I think even someone like me that only likes to have 0.5% his account in any one company (after disposing of the excess on SM ) will be in for a shock during an economic downturn, even if he/she thinks his/her holdings are diversified.

Anyway, I said that my concerns would not affect me. The rates offered, with the prospect of poor liquidity in the SM, aren't enough for me to assume the risk. I'm more than happy to keep my loan portfolio as it is and hold to term, reducing some of the oversized positions I still have on the SM in the coming months, but for me it will be a case of drawing down capital and interest once it is re-payed, rather than reinvesting.

I'm not running away throwing a tantrum, I'm just saying I'm stepping to the sidelines to see what happens and if there are any angles once the new regime settles down. 

All good things come to an end and if someone who is used to getting 2% on their online saving thinks they have found Eldorado when the new ISAs come in then I'm happy for them. I just don't want to be around when the party ends.
 

Yep, that's pretty much where I'm at.

I could not equate this with the statement that 71% will be better off...