blender
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Post by blender on Jul 11, 2014 13:30:36 GMT
The contrast between 6705 and 6879 is very illuminating and encouraging. The first was not such a good offering 7% for 36m with 2%CB and required every bit of help that FC could legitimately (ish) give to get sold in 13 days. The second is a good deal 8% for 12m with 2%CB, and went in less than a day - now taken and trading. There is a contradiction between cashback as an incentive, which is more vaulable on short term loans, while presumably bowwers expect to pay the higher rates for shorter term finance.
FC will know that there are limits on how they can use Autobid to fill such loans, but also they will have learned that the manual bidder that they seek to 'underwrite' the loan with cashback are quite discerning and will look closely at the offer - and not just the few who use this site. This is good for a healthy future - if FC can make any money from it.
A shame to see that those who bought £20 loan parts to flip at par have a buyer rate of 7.9%. Another reason to buy larger parts, which are 8%.
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wysiati
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Post by wysiati on Jul 11, 2014 16:36:43 GMT
A shame to see that those who bought £20 loan parts to flip at par have a buyer rate of 7.9%. Another reason to buy larger parts, which are 8%. The same phenomenon was in evidence with previous property loans. FWIW, FC insists that it is merely another 'display issue'.
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blender
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Post by blender on Jul 11, 2014 18:46:30 GMT
Presumably a 'display issue' is an instance where what the site says differs from what FC wish it to say. Quite a wide scope.
Given a choice between two £20 loan parts at par at 7.9% 'displayed buyer rate' and a single £40 part at par at 8.0% 'displayed buyer rate' I would choose the latter. If Autobid is set to 8% it will not touch anything at 7.9%, unless of course Autobid sees something different from the displayed rate, which would be interesting.
I rather think that the calculation they do may actually result in 7.9% buyer rate for a £20 part after rounding to the nearest 0.1% and that the cause may be in the disparity between the term of the loan and the period of amortisation. I.e. I do not believe that it is a display issue, not without some evidence. Larger parts are fine, which suggests a rounding issue in the calculation rather than a display issue.
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Post by GSV3MIaC on Jul 11, 2014 19:19:45 GMT
Nice try, but the amortisation period for these is 'forever' since iirc they are interest only. Yes, you can, with effort, get the wrong answer on one of the fixed rate loans amortised over 25 years but repaid over 3. Doing it for interest only requires some very advanced math indeed.
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blender
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Post by blender on Jul 11, 2014 23:01:23 GMT
Nice try, but the amortisation period for these is 'forever' since iirc they are interest only. Yes, you can, with effort, get the wrong answer on one of the fixed rate loans amortised over 25 years but repaid over 3. Doing it for interest only requires some very advanced math indeed. Thanks GSV, you are right. This is an interest only loan, though I had not taken too much notice of that because it does not matter to me. Therefore I am talking b*lls and need to retract and think more carefully in future. So at great personal potential loss I have bought one of these £20 parts which have an 8% interest rate but are advertised at par at a buyer rate of 7.9%. On my loan parts listing it comes up as 7.9% - the buyer rate I bought it at. On 'sell individually' it comes up at par as 8% 'buyer rate' but when it is then listed for sale at par it shows on loan parts for sale as 7.9% buyer rate. The original interest rate is cleary still 8% - nothing happens to the loan part on transfer - but it seems that the calculated buyer rate at par gives 7.9%. That should not be. Otherwise I have only £100 parts and so compared the effects of various premia and discounts between the £20 part and the £100 part. On the discount side, to start with there is no difference and for both sized parts and for each 0.1% step up to -0.5% the buyer rate goes up by 0.1%, both £20 and £100 parts being in step. But on the premium side there is a marked difference. For the £100 part the buyer rate reduces by 0.1% for each step of 0.1% step of premium up to at least +1.4%. For the £20 loan part the first 0.1% step decreases the buyer rate by 0.2%, from 8% to 7.8%, and subsequent steps reduce the buyer rate by a further 0.1% up to +1.4% premium. Consequently at premia between 0.1% and 1.3% the £20 loan part buyer rate is always calculated as 0.1% less than the £100 loan part, while at +1.4% they become the same. So for the £100 loan part there is a symmetry of the calculated byuer rate around par at the nominal interest rate, while for the £20 loan part for some reason there is not. I think what happens is that in 'my loan parts' the buyer rate is just copied from that shown in the loan parts list, ie 7.9% for my £20 part. But in sell individually the initial value of buyer rate at par is the interest rate which comes with the loan (the real figure of 8% rather than a calculated figure of 7.9%). When you add a premium or discount you then see a calculated rate. But when you sell a loan part, even at par, the buyer rate which is displayed in parts for sale is a calculated buyer rate, which in this case is 7.9% when it should be equal to the interest rate of 8%. The problem is in that asymmetry about the interest rate of the calculated values of buyer rate for the £20 part, and the calculated buyer rate at par is something less than 7.95% which is rounded down to 7.9%. What does this mean? Of course the underlying part has an interest rate of 8% and that is bought and sold in full, with no loss of interest or value. It is a display issue in that what is displayed to holders, sellers and buyers is incorrect, but people act on that information. However, Autobid probably sees just the true interest rate, since it never needs to see a buyer rate. It would seem that this is not just a display issue, but the result of a problem within the calculation of buyer rate which seems quite important and fundamental. That is if my observations and analysis are correct. I will give up guessing as to why the calculation goes wrong. Corrections and other interpretations welcome.
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