am
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Post by am on Mar 18, 2016 16:58:12 GMT
There are 3 elements to the charges involved in removing money from RS early. 1) RateSetter's fee. 2) Clawed-back interest, the value of which peaks at 35 and 59 months. 3) Assignment fees, where the capital returned can be reduced if that is necessary to place the loans on the market at the then prevailing rate. Given the significant diurnal variation in rates I don't know how this is calculated, but if interest rates have risen significantly this could result in a big hit. There have been earlier threads discussing this. See p2pindependentforum.com/thread/3518/sell-out and p2pindependentforum.com/thread/2953/liquidity-ratesetter-penalty-money-back
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Post by pepperpot on Mar 18, 2016 17:05:59 GMT
Why would anyone use any other market if you could sell out of 5yr penalty free. There wouldn't be much demand for the monthly/access.
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locutus
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Post by locutus on Mar 18, 2016 17:29:31 GMT
Why would anyone use any other market if you could sell out of 5yr penalty free. There wouldn't be much demand for the monthly/access. Only if there were demand from the SM from other lenders.
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Post by westonkevRS on Mar 18, 2016 18:27:02 GMT
Selling a 5yr fixed savings bond early usually attracts 1 years interest penalty. Just saying. P2P should aspire to be better than that. If I lend money for 5 years but decide I need my money back after 3 years and there is someone in the market willing to take these off my hands, why should it cost anything at all? There's no skimming. There is a lender willing to take the loan, and that new lender is the market. But if they want a higher rate as set by the markets then the sell-out lender must pay the difference. It's totally fair and right. You can't have another market for sell-outs, that makes no sense at RateSetter because the risk is equally covered by the Provision Fund. Other platforms sell-out markets might vary in price to the going rate of new loans because the risk profile is different, possibly safer for existing well paying loans. Kevin.
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jimc99
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Post by jimc99 on Mar 19, 2016 2:10:23 GMT
I thought the main part of the charge for selling out a 3 year loan after 1 year was that the interest earned was adjusted to pay the 1 year rate and not the 3 year rate.
Similarly the 5 year rate adjusted to pay the 1 year rate.
Is this the case?
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james
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Post by james on Mar 19, 2016 3:41:31 GMT
And those who don't know how RateSetter and Zopa work might believe that claim. There is a lender willing to take the loan, and that new lender is the market. But if they want a higher rate as set by the markets then the sell-out lender must pay the difference. It's totally fair and right. I agree, that case is entirely fair and right. Now tell people what happens to the higher amount of capital a buyer will pay when the market rate has fallen. You know, the bit where that part of the capital is skimmed off and paid to the protection fund at RateSetter or to subsidise rates at Zopa, both of which allow the platforms to charge higher fees to borrowers while offering competitive interest rates. Now tell people what happens to the capital taken when the shorter term market has had a lower rate than the longer term market. This is an area that is not common between RateSetter and Zopa, just exists at RateSetter. The skimming here is, of course, presumably described somewhere and made plan to investors at the time they consider investing and sellers at the time they consider selling, so they can see what happens to their money and be aware of the potential for capital loss on exit before they invest. It's not illegal concealed skimming but it is a heads you lose, tails we win scenario. What both platforms do in the way of selling into the primary market is an interesting approach that can do a lot to help resale liquidity. But to actually be treating lenders fairly it shouldn't be the heads you lose, tails we win approach that both Zopa and RateSetter are using at present.
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james
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Post by james on Mar 19, 2016 3:48:24 GMT
I thought the main part of the charge for selling out a 3 year loan after 1 year was that the interest earned was adjusted to pay the 1 year rate and not the 3 year rate. ... Similarly the 5 year rate adjusted to pay the 1 year rate. ... Is this the case? Either that or the difference in interest rates in that market between original lending and sale can be the biggest effect. The places where buyers and sellers set rates generally have a premium for such sales, paid to the seller by the buyer. The sell at par platforms have neither. Zopa and RateSetter are the two I know of with the heads you lose, tails we win approach. There might be others, these are the only two I know of at the moment, though. The poor selling treatment is a reason to dislike both Zopa and RateSetter compared to alternatives.
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james
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Post by james on Mar 19, 2016 4:02:55 GMT
Why would anyone use any other market if you could sell out of 5yr penalty free. There wouldn't be much demand for the monthly/access. I normally do it when I want to lock in the return for a longer time instead of being subject to variation of rates. I normally go for shorter terms when I want to lock in an assured exit without resale liquidity issues or costs. Nothing can really beat the assured liquidity of a loan with a set exit date. Even platforms without significant exit penalties do find that both durations of loans can fill, with shorter being more desired by investors than longer at those I've looked at. The resale of longer loans with time remaining helps to meet the shorter term demand.
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alender
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Post by alender on Mar 19, 2016 10:03:55 GMT
Why would anyone use any other market if you could sell out of 5yr penalty free. There wouldn't be much demand for the monthly/access. Is this not what RS do in reverse when using the one month and one year markets to fund longer term loans.
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Post by propman on Mar 21, 2016 11:25:41 GMT
I thought that they changed the terms on paying fees on repaid capital?
Difficult issue here where RS want to retain liquidity that would reduce if 5 year loans may be sold at no net cost. At the least rates would drop significantly on the longer market. I agree more openness on the fees would be good (especially as the loans not sold will often repay soon). the experience is dependent on age of the loans. Those who were lending 3-5 years ago will find selling these expensive. I see the sequential selling as a way to optimise for clued up investors rather than avoiding getting ripped off. Although these days the assumption is that the financial services market have to do your thinking for you and so I understand why some feel RS's approach is "unfair".
- Propman
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am
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Post by am on Mar 21, 2016 12:46:04 GMT
I thought that they changed the terms on paying fees on repaid capital?
Difficult issue here where RS want to retain liquidity that would reduce if 5 year loans may be sold at no net cost. At the least rates would drop significantly on the longer market. I agree more openness on the fees would be good (especially as the loans not sold will often repay soon). the experience is dependent on age of the loans. Those who were lending 3-5 years ago will find selling these expensive. I see the sequential selling as a way to optimise for clued up investors rather than avoiding getting ripped off. Although these days the assumption is that the financial services market have to do your thinking for you and so I understand why some feel RS's approach is "unfair".
- Propman What I think is that loans should be relisted on the market corresponding to how long they have to run, rather than on their original market. People trying to cash in after fewer than 24 months would still be at risk of being hammered by assignment fees, but in general it would make getting money out less punitive.
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james
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Post by james on Mar 21, 2016 19:58:12 GMT
What I think is that loans should be relisted on the market corresponding to how long they have to run, rather than on their original market. Both Zopa and RateSetter do that. RateSetter has the extra painful tweak that also works out the interest that would have been paid if the money had originally been invested in the shorter term market and deducts the difference from capital when selling, retroactively reducing the investment return the seller was getting. Neither compares well with newer platforms which typically either only allow transactions at the value of the capital remaining (par) or allow seller, buyer or both to offer prices. The par platforms may have liquidity issues if interest rates rise because it's not possible to drop the asking price to raise the interest rate, and give an extra good deal for the buyer if rates were to fall. The ones with variable prices solve both of those issues but leave open instead the possibility of people buying just to resell soon afterwards at a higher price. Various rationing schemes have been used in some places to limit this potential but some places don't bother. Attitudes of investors to this issue vary. The newer ones also allow investors to select which individual loans they want to sell. The major potential advantage of both Zopa and RateSetter is the liquidity of using the main market but all that requires is adjusting the price to give a return within the current range on the primary market, not the rest of the things they do. In practice there's no shortage of liquidity at the other platforms I've seen. The simplicity could be an advantage but the way the charging/pricing works to do more than just adjust capital price to hit current market rate range makes them more complex to understand, not simpler.
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am
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Post by am on Mar 21, 2016 20:14:45 GMT
What I think is that loans should be relisted on the market corresponding to how long they have to run, rather than on their original market. Both Zopa and RateSetter do that. RateSetter has the extra painful tweak that also works out the interest that would have been paid if the money had originally been invested in the shorter term market and deducts the difference from capital when selling, retroactively reducing the investment return the seller was getting. Neither compares well with newer platforms which typically either only allow transactions at the value of the capital remaining (par) or allow seller, buyer or both to offer prices. The par platforms may have liquidity issues if interest rates rise because it's not possible to drop the asking price to raise the interest rate, and give an extra good deal for the buyer if rates were to fall. The ones with variable prices solve both of those issues but leave open instead the possibility of people buying just to resell soon afterwards at a higher price. Various rationing schemes have been used in some places to limit this potential but some places don't bother. Attitudes of investors to this issue vary. The newer ones also allow investors to select which individual loans they want to sell. The major potential advantage of both Zopa and RateSetter is the liquidity of using the main market but all that requires is adjusting the price to give a return within the current range on the primary market, not the rest of the things they do. In practice there's no shortage of liquidity at the other platforms I've seen. The simplicity could be an advantage but the way the charging/pricing works to do more than just adjust capital price to hit current market rate range makes them more complex to understand, not simpler. My understanding is that 5 year money goes back on the 5 year market even if the contract has less that 3 years to run. My impression is that RS's rules are intended to quench potential bank runs.
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james
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Post by james on Mar 21, 2016 20:22:42 GMT
My understanding is that 5 year money goes back on the 5 year market even if the contract has less that 3 years to run. I'd welcome that being true because it would reduce the issue with shorter term interest rate adjustment. Not how I understand the things to work but easy for me to be wrong or for it to change over time. My impression is that RS's rules are intended to quench potential bank runs. I don't see how they can do that because they don't stop sales and anyone in a run would have a sufficiently high desire to sell to accept the capital loss, viewing it as less bad than whatever loss they were worried about.
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Post by richa on Jul 19, 2016 12:11:11 GMT
How long does it typically take to liquidate funds in the rolling market? Hhow much liquidity is there on a daily basis? Is the prevailing rolling rate relevant?
Does the amount make a significant difference? e.g. £50k
[I need to use funds for a property transaction and am planning timing of liquidation/withdrawl.
e.g. Mon - request 'Sellout' Tue - receive funds, request 'Withdrawl'? Wed - receive funds?
Thanks.
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