ashtondav
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Post by ashtondav on Sept 19, 2016 16:11:57 GMT
AFAICS, I am quite likely to make a loss if some are repaid early. Why would I take this risk instead of just buying new investments?
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SteveT
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Post by SteveT on Sept 19, 2016 16:15:57 GMT
It greatly depends on your personal tax position, but if you're a non-taxpayer or company lender then the ability to buy loans with a couple of months to go at a discount can boost your return quite a bit (provided they repay!)
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Post by Deleted on Sept 19, 2016 16:29:29 GMT
In general, lending platforms offer the secondary market as a liquidity maker, to help lenders that change their mind/have a sudden need to get out quickly. So the SM is designed as a lender's exit route.
Of course the buyer will evaluate the convenience of each single loan.
I don't have stats, but am assuming most of the sales are from loans sold at par or at a discount.
When the offer on the primary market is large, as it is today here, of course very few poeple would buy at a premium.
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Post by Deleted on Sept 19, 2016 16:49:18 GMT
AFAICS, I am quite likely to make a loss if some are repaid early. Why would I take this risk instead of just buying new investments? For most individuals you would not want to make that bet, but if the deal is "good" the discount there and the period is long (say 170 days rather than the normal 180) you might. I've picked up watches with rates of "14.5%" for 170 days. But it pays to be choosy and, as normal, don't rush to lose money.
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Post by moneymagnet on Sept 19, 2016 16:53:25 GMT
AFAICS, I am quite likely to make a loss if some are repaid early. Why would I take this risk instead of just buying new investments? Interest rates of over 20% on some loans on the SM are an incentive for some to take a higher risk. I don't like to buy on the SM due to the risks of default and early repayment. However, in a weak (and greedy) moment, I have been known to buy if the loan seems reasonable.
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Neil_P2PBlog
P2P Blogger
Use @p2pblog to tag me :-)
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Post by Neil_P2PBlog on Sept 19, 2016 18:13:54 GMT
If you buy at a discount isn't it good if there's early repayment?
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ben
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Post by ben on Sept 19, 2016 20:22:17 GMT
If you buy at a discount isn't it good if there's early repayment? It depends on your tax circumstances. You pay the tax for the full loan, if you do not pay tax then yes it is good but if a normal rate tax payer depends on the amount of discount if got if higher rate tax payer it could seriously cost you if they repay the day after you buy it.
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Liz
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Post by Liz on Sept 19, 2016 21:15:16 GMT
If you buy at a discount isn't it good if there's early repayment? And very bad if they don't repay. Even worse, default the day after you buy; this has happened on loans before on p2p.
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ben
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Post by ben on Sept 29, 2016 12:22:55 GMT
I think there is quite a bit of activity on the secondary market, personally do not use it. There is enough new loans to invest in and plenty of other options. As a higher rate tax payer you will be better using the secondary market to sell rather then buy.
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archie
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Post by archie on Sept 29, 2016 12:44:05 GMT
Yes...no intention of buying unless I see something like the 170 day watch mentioned above. Really just to see if it is worth the trouble of listing things if I want to release cash....never taken more than 2 hrs to sell on SS for example so just wanted to get a feel for the SM on FS. I've sold quite a lot of bits, may take a few days though. You don't lose interest if you list them so it's worth a try.
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ben
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Post by ben on Sept 29, 2016 12:51:02 GMT
If you may need the money quickly do not invest it even on SS something may happen and you will not be able to sell quickly, I would only invest money I was happy to hold for duration.
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Post by mrclondon on Sept 29, 2016 15:33:58 GMT
Since the SM launched last November, I've sold just over £67,000 of loan parts (£6,600 this month) and bought just under £13,000 of loan parts (£2,500 this month). I'm a basic rate tax payer.
On a 12% loan the tax liability is the equivalent of a tenth of your marginal tax rate per month, so a basic rate tax payer after 5 month needs a 1% discount or greater on the purchase, and a higher rate tax payer a 2% discount to cover the inherited tax liability.
So a higher rate tax payer selling at the 5 month mark at a 1.25% (or 1.5% / 1.75% ) discount will benefit AND a basic rate tax payer buying will benefit (assuming of course the loan does not default and fail to recover capital & interest). Win-Win.
The less desirable loans will inevitably be slow to move at any discount. The Greenwich loan is an interesting example as my conclusion was (and is) that the security is pretty sound but will take a very long time to sell if the loan defaulted. But the market is saying otherwise and the loan parts are sticking around at 1.25% / 1.5% discounts. ( I have been buying when I spot it at 1.75% or 2% discount. ) NI loans are inevitably going to be slow to move following the referendum.
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Post by mrclondon on Sept 29, 2016 16:36:16 GMT
Thanks. That's really helpful in giving me an indication of turnover as it is not so easy to see due to multiple pages. Perhaps I can sell you mine at 5 months (!?) FS issue a monthly newsletter (normally in the first week of the month) with amongst other things a graph of SM weekly volumes - this is the graph from this month's newsletter 
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baldpate
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Post by baldpate on Sept 29, 2016 19:07:19 GMT
So a higher rate tax payer selling at the 5 month mark at a 1.25% (or 1.5% / 1.75% ) discount will benefit AND a basic rate tax payer buying will benefit (assuming of course the loan does not default and fail to recover capital & interest). Win-Win. Not to mention the added glow given by the fact that this sweet double-win is acheived, not by chicanery, nor at the expense of any lending member, but through the benevolence of our beloved HMRC 
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SteveT
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Post by SteveT on Sept 30, 2016 16:49:13 GMT
fundingsecure , now that your SM has been operating well for many months and the taxation implications are widely understood (as illustrated by the market pricing), might you consider lifting the 30 days restriction on selling short-dated loan parts, or at least shortening it significantly?
Its original role in managing shorter-dated parts offered at a premium was effectively superseded when the 4% minimum yield limiter was added and, whilst calculated yields on discounted parts could appear pretty high, I reckon FS lenders now appreciate that such yields are largely irrelevant over a matter of days (you could perhaps display a default ">50%" in place of anything higher).Given the potentially advantageous tax position on both sides of the transaction, I dare say there would be Sellers and Buyers that are happy to deal at a fair discount right up to the expected loan end date.
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