Investboy
Member of DD Central
Trying to recover from P2P revolution
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Post by Investboy on Jun 2, 2016 11:39:49 GMT
In the last few days we've noticed increase of cashback, base rates and bonuses on loans. I think we're seeing market forces in their glory.
What I mean is that 12% loans on MT, SS are perceived as better/safer because they pay monthly interests. Also their communication is better which means investors are more confident. FS only pays capital and interests at the very end that increases the risk and we/lenders want a premium for that.
I think 14% base is fair, cashback & premiums are nice add-ons.
I see FS is carving themselves a niche in P2P space. Their offer is interesting to borrower because they don't need any money until maturity and that eases their cashflow. If things go bad they just abandon security and it is FS/our problem to realize it. In return they pay higher rates that attract (more risk tolerant) lenders. So potentially win-win situation.
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Post by mrclondon on Jun 2, 2016 12:02:45 GMT
Quite a number of the FS property loans if they were to appear on ThinCats would, IMO, be offering rates to lenders of 13% to 15% to reflect the real risks that should the loan default the security may struggle to cover capital + interest + fees.
I've felt for some time that the FS strategy of only offering rates that reflect the underlying risk to those lenders willing to put £25k to £100k into a loan (which with 1% diversification implies p2p investments totalling £2.5m to £10m) was short-sighted. There is more than enough evidence that p2p lenders are prepared to take on high levels of risk in return for high stated yields (even if the expected return after capital losses is 6% or less) so offering a premium yield to all lenders seems to me the more obvious way of filling loans with less than perfect security, and reserves the HNWI funds for those few very big loans where there simply aren't enough retail lenders to fill at any stated yield. Attracting HNWI funds into small loans via bonus rates is wasteful of a valuable resource IMO.
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duck
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Post by duck on Jun 3, 2016 5:02:40 GMT
Whilst I would like to think I am not swayed by an extra 1 or 2% or 1% cashback the changes have had a couple of effects on me
1. I am looking at more of the property loans more closely.
2. It makes me feel that my money is 'wanted'. Whilst I have a few individual investments of over £10K/15K (not on FS) this is not common for me. The previous system of offering incentives only to BH's had a negative effect psychologically on me.
So I welcome the recent rate increases and CB offers. Currently my FS holding is just under 5% of my portolio but it is increasing .......
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Post by earthbound on Jun 3, 2016 8:17:24 GMT
I,m not sure i'm looking at this the correct way, if FS lend a borrower £700k against a £1m asset for 12 months (70%ltv)..@ (20%ish interest) ... at the end of the loan, the borrower owes £840k + any other additional fees.
I know how SS works with regards to interest up front but...
Is that correct?
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locutus
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Post by locutus on Jun 3, 2016 8:29:08 GMT
I have nothing in FS but must admit they have tempting offers. However, until they fix their SM, I just can't bring myself to invest.
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SteveT
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Post by SteveT on Jun 3, 2016 8:48:18 GMT
I have nothing in FS but must admit they have tempting offers. However, until they fix their SM, I just can't bring myself to invest. Their SM isn't broken, it just operates differently versus other platforms. If your aim is to be able to sell out of current loans at par before term (as per SS, MT, etc.) then it certainly isn't going to be much use. However it does provide a fair marketplace for both buyers and sellers (provided both parties understand the process).
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locutus
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Post by locutus on Jun 3, 2016 9:01:01 GMT
I have nothing in FS but must admit they have tempting offers. However, until they fix their SM, I just can't bring myself to invest. Their SM isn't broken, it just operates differently versus other platforms. If your aim is to be able to sell out of current loans at par before term (as per SS, MT, etc.) then it certainly isn't going to be much use. However it does provide a fair marketplace for both buyers and sellers (provided both parties understand the process). Think we'll have to agree to disagree on this one. As you know, there are pages and pages of commentary on here about the FS SM and its current implementation. It is far more complicated and inferior in comparison to its competitors. It discourages people from buying on the SM which in turn hurts liquidity and undermines the whole platform. The evidence is right there. SS multimillion pound loans are oversubscribed whilst FS can't shift relatively small loans (that admittedly look quite decent) even at 16% from May.
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sqh
Member of DD Central
Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Jun 3, 2016 11:25:55 GMT
Their SM isn't broken, it just operates differently versus other platforms. If your aim is to be able to sell out of current loans at par before term (as per SS, MT, etc.) then it certainly isn't going to be much use. However it does provide a fair marketplace for both buyers and sellers (provided both parties understand the process). Think we'll have to agree to disagree on this one. As you know, there are pages and pages of commentary on here about the FS SM and its current implementation. It is far more complicated and inferior in comparison to its competitors. It discourages people from buying on the SM which in turn hurts liquidity and undermines the whole platform. The evidence is right there. SS multimillion pound loans are oversubscribed whilst FS can't shift relatively small loans (that admittedly look quite decent) even at 16% from May. I'm amazed at the pages of negativity expressed about the SM on this forum. The FS SM is ideal for smaller investors who need to utilise their tax allowance. They get rates of 16%+. The 40% tax payers can use that to their advantage, by selling short-dated loans at a discount. It's a win win situation. You say, "It is far more complicated and inferior in comparison to its competitors" I say it is easy to use and superior in comparison to its competitors. It's rapidly becoming my favourite platform.
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grahamg
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Post by grahamg on Jun 3, 2016 11:49:29 GMT
Up to 15% now for property in K
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mikes1531
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Post by mikes1531 on Jun 3, 2016 12:31:51 GMT
Up to 15% now for property in K Nothing new about that. This is the fourth tranche of a loan that was started in March, and all tranches are at 15%.
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duck
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Post by duck on Jun 3, 2016 13:21:17 GMT
The FS SM is ideal for smaller investors who need to utilise their tax allowance. They get rates of 16%+. The 40% tax payers can use that to their advantage, by selling short-dated loans at a discount. It's a win win situation. .... and for those of us who invest through a Ltd Co it can be made to work nicely.
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bigfoot12
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Post by bigfoot12 on Jun 3, 2016 13:34:54 GMT
I can't believe HMRC will let this continue once the ISA launches!
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Post by mrclondon on Jun 3, 2016 18:00:18 GMT
I'm another one that finds the negativity over the SM puzzling. Since it launched just over 6 months ago:
I've sold £43,575 of loan parts, the majority at a discount significantly less than the tax liability I've dodged
I've sold every loan part I've put up for sale apart from one (a very large gold jewellery collection)
I've not sold a single loan part at a discount greater than the tax liability I have dodged
I've had to bear the default risk on maturity for just a single loan (a very large gold jewellery collection)
I've bought £7,525 of loan parts, all at discounts more than the tax liability I have inherited
During the last few days there have been 1% discounts on several good loans with c. 3 months remaining, and a -0.75% on the fairly recent Liverpool Business centre from a HNWI clearly liquidating to fund a new project elsewhere. Five figure sums on several loans, all cleared within a few days.
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Monetus
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Post by Monetus on Jun 3, 2016 18:28:36 GMT
.... and for those of us who invest through a Ltd Co it can be made to work nicely. Sorry I'm not feeling very smart today (it's Friday after all!) Could somone elaborate on the benefits of investing through a Ltd Co and using the FS secondary market? Would really appreciate it!
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SteveT
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Post by SteveT on Jun 3, 2016 18:52:15 GMT
.... and for those of us who invest through a Ltd Co it can be made to work nicely. Sorry I'm not feeling very smart today (it's Friday after all!) Could somone elaborate on the benefits of investing through a Ltd Co and using the FS secondary market? Would really appreciate it! A personal lender may opt to sell at a discount in order to take profit as capital gain rather than income. Another personal lender may not wish to buy and assume income tax liability for interest accrued before they bought it. However a company lender would offset the full price paid (including accrued interest) against the proceeds when the loan completes, paying corporation tax on the net income. Therefore a company lender might potentially benefit from buying at a discount whilst a personal lender would not. However, they still assume the risk of delayed payment or worse if the loan doesn't complete on time.
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