where will it all end

Good question and one that i keep trying to get my head round - if one mid to large p2p player goes tits up then I think it would be contagious, liquidity would collapse as aftermarkets would likely lock up with loads of sellers and no buyers.

What would happen then? Would our microloans just sit there frozen but paying out and us lenders just ride it out? 

As some platforms are finding, personal guarantees/directors guarantees are pretty worthless so the motivation to repay is the threat of a CCJ and that would remain a motivation even if a platform went down.

I reckon there has to be some consolidation as some platforms very clearly don't have a critical mass and it's really puzzling why any borrower would be taking on loans at 17% on some of the underfunded platforms.

Jack

As you're new to the forum I think it's only fair to give you the heads up about uncletone's intolerance of sloppy spelling, grammar and the use of capital letters. The last thing we all want is to see you summoned to his study tomorrow morning after only your second post.

I'd go as far as to say that we are at the 'end of the beginning' - for the last several months i have been steadily increasing my investment in p2p but with very clear limits (£20 per exposure for RBS, £50 per exposure for FC, £100 for FK and £500 for Assetz) but in recent weeks the lack of loans means I have hit a wall with everything pretty dead apart from the dreaded FC which still has plenty on offer.

I am convinced that the loan rates we have been seeing over the last year or two are totally unsustainable and that 'phase 2' of this game will see us all settling for more loans are lower rates (dare i mention handbags!). My thinking is that P2P firms have now mopped all those who have been rejected by then banks and willing to pay high interest (11%+) and must now compete with the banks and offer rates 8-10%. 

I'm a small business owner myself and just cannot see how anyone can justify an investment paying some of these rates - they must be desperate - which explains why there are higher than normal default rates.

As a 'natural experiment' i set up two FC accounts, one chasing 11%+ loans and the other settling for c.8% loans. Despite a few thousand in the latter one in c£20 chunks, i haven't had a single default, the higher interest one has loads. One day i'll work out which one makes me the most money

Jack

When you do can you kindly let us know

I'm not sure things happen a lot faster at a P2P/B that is thorough with their duedil.  The valuer of the property for the AC auction that started on 30/Apr paid their visit to the premises on 6/Feb!

Perhaps the writer is linked to a failed bank.

Although Some P2P lenders, including the largest, are struggling to maintain growth, there is huge potential for the sector to thrive. Base rate at 2 or 3% will still leave savings rates at pathetic levels.

One risk is the rush into property, which looks like a 'me too' response from assorted minor lenders looking at the established and successful specialist lenders. If the lenders get it wrong and property developers fail (as in 2008) it will be the inexperienced P2P savers taking the losses, and possibly the P2P provider failing as a result of adverse publicity and a rush to the exit. Short term bridging loans at high rates look like a game of pass the parcel which assumes the music never stops! 

The BoE won't increase rates to above inflation unless bond markets force them to do so by panicking and dumping Gilts. Such a situation would also involve a currency crisis, as if you're having doubts about a Government's ability to repay its debts, the last thing you're going to want to do is hold the currency of that Country.

The reason the BoE will keep base rates below inflation by design is to erode the real value of the UKs National Debt; currently somewhere in the region of 90% of GDP. It also follows that a rise in base rates will increase the UK Government's costs of servicing this vast National Debt.

Just my opinion, but it's not in the present interests of the British Establishment to have positive real interest rates due to the debt pile, so until all credibility of the BoE is lost, any increases will be nominal only, i.e. below the rate of inflation (which when you look at how Government statisticians calculate CPI, is running at rates in excess of the projected 2% or so it's currently being touted to be).

We are operating in an environment of Financial Repression, and I'd venture to suggest that a return to the 'normal' is going to be violently disruptive rather than managed. To this end, I consider the author of that article to be talking complete and utter tripe. P2P lending will continue to remain attractive as long as savers continue to be screwed over by the Establishment, and I see this situation continuing for a number of years until balance is restored by the markets (when the current theme of Central Banker Omnipotence has run its course).