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Post by valueinvestor123 on Oct 29, 2016 13:46:38 GMT
Comparing p2p with bank accounts paying 3% is completely inappropriate: those are not at all the same asset classes. P2P hasn't been through a full business cycle and these development type loans haven't been around long at all, for the mass market. There will be years where default rates will skyrocket out of the blue. These kinds of loans usually average out 5-6% pa over long business cycles (perhaps the asset class is akin to junk bonds). However this is assuming that the starting rates are in the mid-high teens to begin with. If the starting rates move into single digits, it's likely the long term returns may actually end up negative. I don't for a second doubt there will be other investors instead of me. There is always another fool ending up holding the parcel. I thought perhaps if other investors don't take up these loans, perhaps we can keep SS and the likes in check but I guess greed will prevail, as always. Rates will come down and eventually the asset class will end up in tears. I have seen this many times before. Or is it different this time?  vi123 |
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mack
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Post by mack on Oct 29, 2016 13:53:53 GMT
In the bridging loan marketplace, as in any other part of the finance industry, there are undoubtedly loans that represent lower risk and when SS offerred a standard 12% it was probaby accepted by those that gave it any thought, that the return was a balance between higher and lower risk and took theiir lending decisions accordingly, I suspect most people however did not give it any thought and were just swayed by the 12%. Now SS state that some loans will be offerred at lower rates. On an unbiased look at the current loan book some of those loans should have been offerred at higher rates (ad that is not solely with the benefit of hindsight many potential flaws in the security, LTV, borrower etc have been flagged up here well before the loan was made). If one carefully reads the SS website it says they charge borrowers an average 1.5% per month. Although it is early days since the change this has not yet been altered. I submit that as there is no talk from SS of it we will not see loans offered at higher than 12% in the future, if any even reach those rates except lin cases where they are an effective roll over, like DFL008. Therefore the purported reason of offering more better quality loans is IMO just a cover for SS's avariciousness. I concur. This is not about big hitters or small investors. It's whether investors are just piling in due to the simplicity of the platform and blindly accepting lower rates and the same or higher risk. When they couldn't fill loans there were cashbacks so they could clearly afford to offer higher rates if needed.
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mack
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Post by mack on Oct 29, 2016 14:05:15 GMT
Comparing p2p with bank accounts paying 3% is completely inappropriate: those are not at all the same asset classes. P2P hasn't been through a full business cycle and these development type loans haven't been around long at all, for the mass market. There will be years where default rates will skyrocket out of the blue. These kinds of loans usually average out 5-6% pa over long business cycles (perhaps the asset class is akin to junk bonds). However this is assuming that the starting rates are in the mid-high teens to begin with. If the starting rates move into single digits, it's likely the long term returns may actually end up negative. I don't for a second doubt there will be other investors instead of me. There is always another fool ending up holding the parcel. I thought perhaps if other investors don't take up these loans, perhaps we can keep SS and the likes in check but I guess greed will prevail, as always. Rates will come down and eventually the asset class will end up in tears. I have seen this many times before. Or is it different this time? vi123 Nope. You are spot on. I will not invest in any of the new loans if there is no lower risk. I hoped they wouldn't but was not surprised that investors piled in still. It's almost as if they believe Savingstream has some magic ability to only pick loans that will never default.
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Post by dualinvestor on Oct 29, 2016 14:06:45 GMT
Comparing p2p with bank accounts paying 3% is completely inappropriate: those are not at all the same asset classes. P2P hasn't been through a full business cycle and these development type loans haven't been around long at all, for the mass market. There will be years where default rates will skyrocket out of the blue. These kinds of loans usually average out 5-6% pa over long business cycles (perhaps the asset class is akin to junk bonds). However this is assuming that the starting rates are in the mid-high teens to begin with. If the starting rates move into single digits, it's likely the long term returns may actually end up negative. I don't for a second doubt there will be other investors instead of me. There is always another fool ending up holding the parcel. I thought perhaps if other investors don't take up these loans, perhaps we can keep SS and the likes in check but I guess greed will prevail, as always. Rates will come down and eventually the asset class will end up in tears. I have seen this many times before. Or is it different this time? vi123 For the most part people are not financially sophisticated, going back 50 years there have been frauds on the mass market, Fire and Marine, Barlow Clowes, BCCI, Icelandic Banks to name but a few. The one common factor is that they offered a product that was much better than was available from seemingly similar sources. On reflection it was found found that the companies behind the products on offer did not have the same capital and/or security as more established competitors. The axiom "if something seems too good to be true, it usually is" has often been proved right and just because these are "niche" not mass market products at the moment it does not mean it will not apply to P2P. I understand people were still clamouring to become clients of Mr Madoff and Mr Ponzi right up to the day they got their visits from the authorities. Like you I believe the lower the starting rate the more chance it will all end in tears.
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mikes1531
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Post by mikes1531 on Oct 29, 2016 14:19:55 GMT
It's clear to me that the two lower-rate loans have had less support than previously. Based on past performance, I would have expected the maximum allocation for PBL144 to be about £150 if it had been at 12%, whereas it actually was £750. Likewise, PBL145 probably would have been about £1300 whereas it actually was at least £3k. And instead of 2000 investors pre-funding these loans there have been about half as many. But as long as SS can fund loans fully at lower rates they will do so since it helps their profitability. They may have to be a bit more careful setting the rate on larger loans, so there may be a bit of 'trial and error' rate setting in the coming weeks.
The critical question is what happens next. When the SS investors currently showing reduced appetite for lower-rate loans give up waiting for better rates, will they decide to accept the lower rates and return to SS investing? Or will they migrate to other platforms in search of higher rates?
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mikes1531
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Post by mikes1531 on Oct 29, 2016 14:32:11 GMT
I hoped they wouldn't but was not surprised that investors piled in still. There has been a noticeable reluctance to invest in these loans, with half as many investors pre-funding as before. But that won't make any difference to SS when loans remain oversubscribed. The oversubscription factor may be reduced, but what difference does that really make? There will be no incentive for SS to change course until the total pre-funding is insufficient to fully fund a loan.
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Post by harvey on Oct 29, 2016 15:36:18 GMT
I won't look at any SS loan at less than 11% . I've sat the 9% and 10% loans out.
If this is the future, my investments in SS will dwindle away to nothing as 12% loan dates run down to the wire and I sell out of them.
To me, lower rate loans increases the risk of investing in SS, not the opposite.
If loans are paying a mighty 12%, with good diversification I should be able to suffer some losses along the way and still make an overall positive return that is worthwhile. If I'm only getting 9% or 10% to start with, I've got a lower profit margin to play with before the net returns after 1 or 2 losses are so low that I'm into 'it's not worth the risk' territory.
I'm not surprised SS have lowered rates. My only surprise is that they've held them at 12% for this long, given the imbalance between demand and supply that's been evident for over a year. In the early days they had to offer cashback to get 12% loans funded. Now they can fully fill at 9% or 10% with no incentives. I expect 8% is coming next. SS seems to have acquired very strong brand loyalty owing to the simplicity of their business model and so can now take advantage of that.
But this should enable younger platforms like MT, which are still having to offer 11%/12%/13%, to grow faster and attract more investors. Then in a year those newer platforms will cut rates to investors and so it goes on.
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Post by GSV3MIaC on Oct 29, 2016 15:41:49 GMT
/mod hat off
Unless loans show up with substantially more security for thje lower rates, I personally will be doing what I did at FC, AC, and ReBS .. 'feet with vote my shall I' (rearrange these words into a well known phrase or saying). If no P2P platform is offering sensible balance of risk/reward (by my definitions, not theirs) then it's back to the stock market(s), futures trades, or backing the gee-gees. Maybe the PF is worth a 3-4% differential vs ABLRate, MT, etc, but I personally don't think so. 8>.
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dan83
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Post by dan83 on Oct 29, 2016 18:38:50 GMT
To me, lower risk means lower LTV, I'm more then happy to take a lower rate if some one is lending less money against a more valuable property, but a BTL @ 70% doesn't seem less risky to me.
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hazellend
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Post by hazellend on Oct 29, 2016 18:49:45 GMT
ABLrate recently had a 25% LTV property on a 12% one year loan.
They currently have 2 decent LTVs at 14% available.
If they can get the borrowers at these rates why can saving stream not?
I've been selling out of saving stream and moving more into ABLrate and Moneything, but still rate saving stream highly, particularly for its very liquid secondary market.
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Post by supernumerary on Oct 29, 2016 18:57:59 GMT
However it is dressed up the lowering of rates is an attempt, which will probably be successful, to reduce the cost of their raw material. In isolation 9, 10 or 11% seem a reasonable return to lenders by now used to much lower rates elsewhere, it is only when compared to what was previously offered that it seems miserly. It is exactly the same strategy as many businesses use of loss leaders, establish a good reputation and then cash in on the customer base that they have built. A lot of customers (lenders) will take what they say at face value and another group not even notice a few will question it, but at the end of the day SS will rely on their reputation to fund more business, which to be fair is what they said they would do, but, if the two lower rate loans that have been offerred so far are anything to go by, they are unlikely to be of much, if any, better value than what was previously offerred before. Despite a lot of people believing SS is alturistic and by calling the directors by the first name they are their friends it is a business that has little or no risk and profits (despite already being the most profitable P2P platform in the Universe) from writing more and more loans at whatever rate. I have a seven figure p2p portfolio overall. Savingstream was going to get seven figures from me at one stage. I now have over 50% less than peak (still a few hundred K) as it does not work well for a "BH". The lower rates make it less appealing unless they are genuinely lower risk or savingstream are genuinely competing for business and not lining their own pockets at me taking on the same risk. To both of you, I say, I admire your ‘ customer resistance’ philosophy.  At the moment there are plenty of 12% loans available, so IMHO, stay with it until the 12% loans become very few…  From my own perspective, if lenders want to lend on these lower rate loans, so be it, let them make more money for Saving Stream, so that the Provision Fund can be kept topped up, as and when…  While those investors invest in lower than 12% loans, I shall keep investing in the 12% loans and I am fairly relaxed about that… 
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Post by dualinvestor on Oct 29, 2016 20:26:09 GMT
My comments, and I believe those of the others is not one of customer resistence because I doubt there is much, if any, and any existing customers who decline at lower rates will be replaced by ones who will. It is a simple obsevation of what is likely to happen and the reason behind it not being the alturistic ones expounded by SS.
Enjoy your 12% a few of the DFL loans will last a while most, not all, of the others are due to be repaid within the next six months, if you are happy to hold those to expiry and continue to hold the overdue ones it will still be a pretty short term strategy.
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mikes1531
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Post by mikes1531 on Oct 29, 2016 20:26:59 GMT
If they can get the borrowers at these rates why can saving stream not? We don't know that they can't. We only know what they tell us. And if they can, they've taken the decision to keep a larger share of the pie and give their investors a smaller share.
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Post by supernumerary on Oct 29, 2016 21:07:35 GMT
ABLrate recently had a 25% LTV property on a 12% one year loan. They currently have 2 decent LTVs at 14% available. If they can get the borrowers at these rates why can saving stream not? I've been selling out of saving stream and moving more into ABLrate and Moneything, but still rate saving stream highly, particularly for its very liquid secondary market. I admire your ‘customer resistance’ philosophy as well... Let us all see what happens next, but IMHO, there will be more 12% loans available on Saving Stream. It still states on the Saving Stream website opening page; Invest your funds and earn up to 12% interest per year with our secured peer to peer lending platform.AND...
How do we offer an up to 12% per year return on funds?So stay positive, IMHO, there will be more 12% loans coming on stream, on Saving Stream. BTW, just like the DUDE, I don't work for Saving Stream...
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mikes1531
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Post by mikes1531 on Oct 29, 2016 21:25:44 GMT
Let us all see what happens next, but IMHO, there will be more 12% loans available on Saving Stream. It still states on the Saving Stream website opening page; Invest your funds and earn up to 12% interest per year with our secured peer to peer lending platform. SS can continue to make that statement for many months, even if no more 12% loans are released. It'll be true as long as there's even one 12% loan left on the platform, because a part of that loan might appear on the SM. I'm eagerly awaiting the next 12% loan to appear in the pipeline -- but I'm not holding my breath.
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