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Post by khampson on Jan 25, 2017 10:03:20 GMT
I am still new around here, what are thr point in lending in the 1 year market at 2.9% when the rolling is at 3.3% I am struggling to understand this!
Also if you lend in the 5 year market does it pay part of the loan and part of the interest each month?
Thank you for your help
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Jan 25, 2017 10:07:44 GMT
I am still new around here, what are thr point in lending in the 1 year market at 2.9% when the rolling is at 3.3% I am struggling to understand this! Also if you lend in the 5 year market does it pay part of the loan and part of the interest each month? Thank you for your help 5 yr loans are amortising so yes part capital & interest each month, fixed amount (slightly variable actual payments due to fee deduction) interest a higher proprtion initially. 1yr market, just certainty of a locked in rate, whereas rolling can fluctuate both in rate and term so you might get your 3.3% back after a week and only get 2,7% on reinvestment (unlikely but given wild fluctuations currently) or have cash drag
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Post by khampson on Jan 25, 2017 10:23:54 GMT
Does that apply to the 1 year market?do you get interest and part of the loan paid back same as the 5 year market?
Thanks
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Jan 25, 2017 10:30:05 GMT
Does that apply to the 1 year market?do you get interest and part of the loan paid back same as the 5 year market? Thanks No, the 1yr is a fixed term bond, so interest & capital are all at term, there are no monthly payments (can repay early of course) There is fee if you want to withdraw early, there are summary boxes on the investment pages detailing this and key features of each loan length (ignore reference to defunct 3 year) Other point is that the 1yr market is considerably less active than the rolling so may take longer for funds to be lent if you dont take current rate (NB I havent use it for several years, since rates dropped from 5%+)
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mark123
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Post by mark123 on Jan 28, 2017 15:57:01 GMT
I am still new around here, what are thr point in lending in the 1 year market at 2.9% when the rolling is at 3.3% I am struggling to understand this! Also if you lend in the 5 year market does it pay part of the loan and part of the interest each month? Thank you for your help You ask why 1 year rates can be lower than rolling rates. I think (please somebody correct me if I have got it wrong): - 5 year market - you should get your money back monthly over the loan term (up to five years)
- One year market - you should get your money back at the end of the loan term (up to a year)
- Rolling market - can fund loans up to 5 years - you get your money back whenever you want only if new loans from other lenders replace your funds
So, if lenders lose their faith in RS, your funds could be tied up for much longer than you expect.
Hope this helps, Mark
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Post by stevepn on Jan 28, 2017 19:44:21 GMT
In the 5 year market the rate you get it at eg 5% is only obtained if you re-invest your money every month at the same rate.
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adrianc
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Post by adrianc on Jan 29, 2017 9:07:52 GMT
In the 5 year market the rate you get it at eg 5% is only obtained if you re-invest your money every month at the same rate. Same as any amortising loan. You get/pay 5% on the outstanding balance.
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