Newbie buying on SM

Sellers can apply a premium (or a discount) to their parts when listing them for sale on the SM. This reduces the Buyer Rate to something less than the original rate on that loan part (or increases it, for a discount).

In your example, the 1.7% premium asked by the Seller would reduce the original rate of 9.8% to an effective Buyer Rate of just 4.6% over the remaining term of the loan (and less still were it to be repaid early). A very poor offer indeed, IMHO !

Sellers add premiums where they have parts that they think other lenders may be willing to buy at a lower rate than the part originally carried (effectively banking a profit on the sale of that part). Most of the parts currently listed at high premiums are in loans that pre-date FC's move to all Fixed Rate auctions, where the original interest rate might be a lot higher than the current fixed rates (I still have a few A+ parts paying 13.8% which would sell instantly even if I listed them at the maximum 3% premium that FC permit).

The reason you tend to have to pay a bigger premium on loans at this late stage of its repayment cycle, is because there viewed as a lower risk then buying them more early in the repayment cycle. So sellers feel that buyers will be more willing to buy these loans at lower rates.

As stevet has pointed out, now is not a good time to be buying on the SM.
As the lack of loans on the PM forces buyers to look for loans parts on the SM and so pushes up premiums for the loans you have buy on the SM. lts best to wait for there to be much stronger demand on the PM. Which forces sellers to lower their premiums in order to get a quicker sale of their loan parts.

 Thank you for all your comments, beginning to see that I need much more information regarding the SM so could you please comment on the following .

Original loan was £80,000 at 9.2% over 60 months  Risc band C  . 28 payments made 32 remaining next payment of 26 Jan.2016  Bad debt risk 3.2%

Loan is in two parts: Part 1  Buyer rate 9.2%      selling price £47.26 
                            Part 2.  Buyer rate 9%        selling price £35.37

Why is the two parts rates different?

Thank

Back in the day when that loan was taken out loans were funded by reverse auctions. That resulted in loans being made up of loan parts with different rates. So if even if people offer them on the secondary market at par, they may well have different rates. You can be better off buying a loan part lent at the marginal rate at a premium that a loan part lent at a lower rate at par.

On the other hand if loan parts are sold a different premiums/discounts they would have different buyer rates even if the original rate was the same.

(I guess one of these loan parts started at £80 and the other at £60.)

If you give us the loan number (and the parts haven't been sold) someone could give a more precise explanation specific to these loan parts.

Both of those parts are listed at par so the original rate on each part will be the same as offered as the Buyer Rate now (possible rounding error excepted). As am has explained, non-property loans up until a couple of months ago were filled by reverse auction so parts are held at a wide variety of rates, depending how well the buyer did originally.

In this instance, the 9.2% part is clearly the better deal over the 9.0% part.

[That said, I don't tend to hold anything older than 6 months and I'd certainly be nervous about this loan, given the sector they are operating in (oil & gas). 9.2% is a long way below the current fixed rates that B loans are sold at on the PM (10% - 10.6% depending on term) so personally I'd give it a miss and wait for some decent new PM loans to be listed next week]