Risk

1. Please us the search button. This topic is discussed extensively in this forum.

2. Basically bridging loans have been offering these rates for a very long time and there are multiple platforms offering them.

3. The LTV is only one parameter. You have to consider the 'time effect' as well. A property taken over by SS will have to be sold in a rush and it might not get so close to the full market value as you would hope, specially if a downturn on this sector comes by and bring the values down.


In any case the overall risks are far lower than with non asset-backed loans.

It's a very valid question though, and one I continually ask myself about all my investments on all the platforms I use.  Why am I getting rate x for this?

Regardless of what x is, and which platform you're talking about, something that contributes to it is a) less traditional bank finance being available and b) lower costs (regulatory / capital / infrastructure, staff and buildings etc) associated with p2p when compared with traditional finance.

If somebody looking for a bridging loan would have had to pay high twenties to a traditional bridging loan outfit then they benefit if they pay SS a few percent less than that, we benefit because we get considerably higher yields than in, for instance, a cash ISA, and SS benefit because they capture the business and effectively get a turn. 

But again, keep asking the question (and as suggested by @hor1997 root around the forums, there's lots of good discussion).  samford71 in particular has some quite sobering things to say about LTVs and distressed asset sales.

Re bridging loans in general: have they always (historically) demanded such high interest rates? 
I am just trying to rationalise my investments and to some extent justify stock market investments too: there should be much more risk associated with stockmarket investments (often no assets at all...) yet it is very hard to get more than 8 or 10% return in the long term and usually you have to wait for 20+ years to actually harvest those returns.
Given the risks, it seems assetbacked loans should command a much lower premium and perhaps it is just a matter of time until this will happen?
Maybe that's the 'new paradigm' but gut-feeling tells me this can't last and some 'adjustment' is going to take place in risk re-pricing.

12% on SS feels about right for me. I wouldn't have nearly as much on there if it was 10%, and I guess that would be similar for other too meaning the SS loan book would only be a fraction of what it is now.

re. bridging loans, 18% is not uncommon on 6/12month loans and that's before arrangement and exit fees i.e. the shorter the term the higher the effective rate. Moneysupermarket citation

Personally I see P2P as a higher risk than a well diversified "collective investment" based stock market portfolio where there is a realistic floor to the downside. You can lose everything on a loan theoretically so there is no limit to the downside, the same as shares in an individual company, so the rewards need to reflect that level of risk.

I can shelter my equity investments from tax as well which is more difficult with P2P lending although this will become easier post April with the "tax free interest" and the Innovative ISAs coming in.

There are a some good examples over at AC.  Loans #45 and #79 are refinances of previous loans, where the amount lent previously was based on a value far higher than that at the time of the AC loans.  The former lenders took significant losses to get out of their loans.

There are also a couple of defaulted AC loans (#129 and #132) where receivers have been called in, and investors have been asked to approve sales of the security for prices considerably below the valuations produced at the time the AC loans were made.  The proceeds from those sales -- if they actually progress to completion -- won't be enough to cover lenders' capital and accrued interest.  Whether investors ultimately will suffer losses won't be known until attempts to pursue the borrowers' PGs or other assets reach a conclusion.  Which brings up another point, and that is that there's likely to be a long wait for matters to be resolved and investors may not be able to access the funds they've invested for some considerable time.  (ISTM that both of these AC example loans defaulted over a year ago, and resolution is still some way away.)

I have similar feelings, especially with a tsunami of IFISA money expected.  I'm treating the situation as a case of 'make hay while the sun shines'.

This is interesting. But it seems 'the floor' with asset-backed investments is the asset and in Savingstream's case and other property-based investments, unless the houseprices go to 0 (or if there is outright fraud, but this wouldn't matter if diversified), there should also be a floor.
However Savingstream is special in that we are lending to them rather than to the assets that they hold, if I understand it correctly (I may not, I invest across 10 different platforms).
With companies, shareholders are last in line to get anything and usually in administration, there is nothing to be had. But you are right, it is rare (though not totally impossible) that a market will collapse completely but it can be close enough. The Great Depression lost investors about 90% from peak to through in real terms from memory (I wasn't around, I just remember reading about it).