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Post by buggerthebanks on Jun 16, 2014 21:43:37 GMT
I've just read RateSetter's take on this & wondered what other forum members thought of it.
Personally, I don't like the idea but do find it hard to argue against on ethical grounds. I think I'm just concerned that it might be the start of the big boys bossing us around again.
For me, P2P in its current form feels "pure": higher savings rates with lower borrowing costs & a pioneering start-up company in between the two. I can't help but feel that large corporates raising funds en masse (& no doubt awarding themselves wazza bonuses in the process) will somehow tarnish this...
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Post by davee39 on Jun 16, 2014 22:19:55 GMT
Done properly, and with RS it will be, it can only be beneficial.
To become profitable, and therefore financially stable, the P2P companies need continued growth and a reliable income stream. Among the general public, accepting rates as low as 0.1% with banks and the mutuals, there is a fear factor due to the lack of FSCS guarantee. The institutional cash will help growth and financial stability. Ultimately rates may well fall as the risk premium drops, but they should still be above those available from the Bonus driven Banks. Funding Circle could develop away from small investors. They operate a high risk model, and their US business is only open to corporates and wealthy individuals. Zopa are redesigning the way their matching works but I cannot see them abandoning the small saver, especially when they have tried to position themselves as the lowest risk P2P and are working to educate the saving public about the general safety of their platform.
Risk takers now have numerous smaller platforms to play on and these seem unlikely to attract corporate interest.
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angrysaveruk
Member of DD Central
Back and to the left..
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Post by angrysaveruk on Jun 17, 2014 12:26:02 GMT
The return per unit market risk is pretty attractive vs. many other asset classes. The problem is while the return per unit market risk is attractive, the operational/platform risks you take are opaque but actually far more dangerous. Platform/operational risks (fraud, settlement error, business failure etc) could cause the investor to lose 100% of their capital while market risks would probably only result in a few percent (assuming diversified). I totally agree with you on that. The biggest risk for me in a P2P investment is fraud/business failure which is why I try to avoid the newer P2P platforms. Large institutional investors will reduce this because they will do a bit more Due diligence than a small investor like myself, but will probably reduce the yields since they will also increase the supply of money on loan, if you look at the amount on offer on Rate Setter at a given time it is pretty small. Even a few high net worth individuals investing on the market could have a pretty big effect on the rate, let alone a financial institution. The risk adjusted return from P2P like ratesetter is very good since you are basically doing what a bank does but without all the overheads and expensive regulatory requirements, but that free lunch will only last for so long.
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james
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Post by james on Jun 29, 2014 3:15:00 GMT
Just don't assume that it is only the newer platforms which have that risk. The older ones have more loans out there and bigger potential losses from a broad problem.
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Post by westonkevRS on Jul 14, 2014 18:14:01 GMT
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Post by geoffrey on Jul 14, 2014 21:37:19 GMT
Does this mean that we can expect the rates to drop dramatically from next week? 10 million is a huge dollop, although I'm sure it will be fed in slowly. I notice predicted coverage this week is pretty low on the 4-5 year market, meaning that one big lender could change things very quickly. What safeguards have been put in to prevent sudden volatility of rates?
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Post by westonkevRS on Jul 15, 2014 6:00:28 GMT
Geoffrey,
Clearly every lenders strategy is private, I wouldn't dilvulge yours! However RateSetter lent around £25m in June, so crudely let's called that £300m in the next year. £10m is just 3% so it's hardly going to move the markets. Only you the P2 lenders can shift our markets!
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Post by GSV3MIaC on Jul 15, 2014 6:47:10 GMT
My query is whether the Business bank is getting a deal not available to the rest of us, as they do at funding circle. If they only want to lend to business folks for business purposes it sounds as if they are .. I can't pick who I lend to!! So some more details of how it will work please .. At least with FC we know how it works, even if it's a deal we can't have.
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Post by jackpease on Jul 15, 2014 7:36:21 GMT
If the Big Guns are in then we do need to know if it will iron out peaks and troughs. Eg I keep a sum tucked away at the top end of the offers board if there's a peak (eg 4% on the one year bond - it happened a few weeks ago) then my money will be drawn down.
If the Big Guns are sitting there with a (say) 3.x% 'buy now' on one year - then we need to know (if necessary by private email) that our money will NEVER be lent because the Big Guns are there ironing out peaks..
Yes i do get those emails saying 'your money is sitting there unlent' but at the moment there are major peaks and troughs worth waiting for
Jack P
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Post by oldatheist on Jul 15, 2014 8:18:44 GMT
The way I understand this will work is that 40% of any qualifying loan will be allocated to the bank (reducing to 20% once £4m has been lent). The remaining 60/80% will hit the market in the normal way so I doubt we will even see this money on the lending offers.
Over all this is a relatively small amount of money going in to a small percentage of RS loans (assuming that business loans are far outweighed by personal loans) and I don't really see much danger in this having a negative impact on market rates.
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spiral
Member of DD Central
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Post by spiral on Jul 15, 2014 8:23:23 GMT
If the Big Guns are sitting there with a (say) 3.x% 'buy now' on one year - then we need to know (if necessary by private email) that our money will NEVER be lent because the Big Guns are there ironing out peaks.. This is exactly right, I would love to say to RS, heres my debit card, if rates hit x%, take £1000 and lend it, if not, leave it where it is. I'm sure this is how the institutional lenders must work as there is not a massive influx of funds on the market. Unfortunately for you and me, if we want to lend at x%, we have to leave it there until it gets matched thus creating the market from which the institional investor can benefit. As westonkev says though, overall, quite a small sum but probably more than enough to ever prevent the market from going above say 6.3% in the 5 year market again for very many months if that is the level they have set in that market.
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Post by davee39 on Jul 15, 2014 8:53:30 GMT
Amazing how upset people get.
The majority of RS loans are for phones, home improvements, new cars etc and these are not affected by govt lending. The new money is to help individuals become self employed, or improve their small businesses. A look at the other Personal P2P provider, which has had a similar deal for some time, suggests that that these are a tiny proportion of lending. Now the benefit of these funds is that RS can push into a specific new market, strengthen its business and help people into employment. Looks like WIN WIN WIN to me.
The announcement indicates that the investment was only made after considerable due diligence. I am relieved (and surprised) that RS did not find anything worrying in HM Governments finances.
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spiral
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Post by spiral on Jul 15, 2014 11:17:25 GMT
I don't get upset. I just get annoyed when any organisation, P2P or otherwise, moves the goalposts and many people are not bothered/savvy enough, to know what's going on. Building society's, energy company's, furniture company's sales to name but a few. I'm not saying that RS have moved the goalposts, but if they have, I'm savvy enough to know whether or not ro jump ship. Just ask Zopa
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Post by yorkshireman on Jul 15, 2014 11:44:04 GMT
I’m not being a smart a** but this vindicates what I have said for months, the city boys have been covertly active in the RS market and now it’s official.
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Post by chielamangus on Jul 15, 2014 11:59:59 GMT
However RateSetter lent around £25m in June, so crudely let's called that £300m in the next year. £10m is just 3% so it's hardly going to move the markets. Only you the P2 lenders can shift our markets! Ah, but it is marginal money and that is where prices (interest rates) are determined. However, there's lots of alternatives to RS so the flow of money out should help prevent rates falling much. Compare RS with Wellesley: 5 year RS is currently 6.1-6.2 compared with W's Capital at 6.34 (real, nominal is 6.76) 3 year RS is currently 4.5 compared with W's Capital at 5.67 (real, nominal is 5.1) - yeah, don't ask me why W have done it this way 1 year RS is currently 3.5 compared with W's Capital at 4.8 (real, nominal is 4) - yeah, don't ask me why W have done it this way 1 month RS is currently 2.1-2.2 compared with W's 6 month Capital at 3.6 (real, nominal is 3) - ditto RS products are for income so the actual rate might be even lower (those days when money is unmatched). It's not an exact comparison, I know, but the only reason to go for RS at the moment is liquidity and risk spreading.
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