merlin
Minor shareholder in Assetz and many other companies.
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Post by merlin on Nov 18, 2013 10:35:20 GMT
The wires seem to have been alive to the now widespread rumour that FC are about either to launch a new business in the property market or to start doing mortgage type business on their existing P2P site. Looks like loans would have to get bigger on average and longer in length but at least there would be the security of bricks and mortar.
What are the vibes out their, is this a reality or just some cute rumour mongering to get free publicity? If it is real when are they going to launch?
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merlin
Minor shareholder in Assetz and many other companies.
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Post by merlin on Nov 19, 2013 21:05:30 GMT
This weeks FC Newsletter has announced its intended move into the funding in the property market. Apart from taking on a big beast from Barclays Bank there is not much indication of which part of the property market they are going for or the type of funding methods they will use. There are lots of risks and regulations associated with the private property market so I guess they will want to avoid to look or operate in anyway like a Building Society. The commercial property market also has its pitfalls and also many competitors with Assetz already establishing a name for itself in the P2P market. It will be fascinating to see what they do and how they do it over the coming months.
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Post by mrclondon on Nov 19, 2013 23:23:23 GMT
Yes it will be interesting to see how FC pitch this vs Assetz / LendInvest / Relendex. I wonder how many property finance deals there are to be done at rates that P2P lenders will stomach. Many of the Assetz deals are as a result of debt restructuring after the credit crunch where mainstream lenders are simply not going to be remotely interested, but we generally fill them at 10%+. There must be a point where the banks have offloaded all the loans they wish to. Assetz's lend to let mortgages to non-uk residents at 6.5% were slow to fill (despite generous cashback), and the first Relendex loan failed at 5.25% (but the current one at 9% looks as if it will fill).
If FC have to target lower rate loans for the property sector, the real question becomes the extent to which FC's lender base will believe their bad debt estimate for this new market, given that FC's attempts at bad debt recovery have proved to be so ineffective thus far.
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merlin
Minor shareholder in Assetz and many other companies.
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Post by merlin on Nov 20, 2013 6:28:09 GMT
Yes it will be interesting to see how FC pitch this vs Assetz / LendInvest / Relendex. I wonder how many property finance deals there are to be done at rates that P2P lenders will stomach. Many of the Assetz deals are as a result of debt restructuring after the credit crunch where mainstream lenders are simply not going to be remotely interested, but we generally fill them at 10%+. There must be a point where the banks have offloaded all the loans they wish to. Assetz's lend to let mortgages to non-uk residents at 6.5% were slow to fill (despite generous cashback), and the first Relendex loan failed at 5.25% (but the current one at 9% looks as if it will fill). If FC have to target lower rate loans for the property sector, the real question becomes the extent to which FC's lender base will believe their bad debt estimate for this new market, given that FC's attempts at bad debt recovery have proved to be so ineffective thus far. With you all the way on this. One business I am involved in has recently done some major restructuring of financing using property as security at a good bit less than 6%. In that instance the deal was with HSBC and was negotiated and completed in about six weeks. However the business is sound and has a twenty five year track record of growth and good management. So I guess that what will be offered to us will be the more risky propositions that either the banks want to dump or where the management are not well trusted. I forgot to say when I made the first post on this thread that there is another issue concerning the time period of these "property" loans. Most individuals and businesses would I suspect be looking for much longer periods (10 to 30 years) than FC provide at the moment. This will change the whole model both of funding and borrowing and may not fit well with their current lenders. However lending against existing assets for shorter periods is a much easier thing to manage and is not that much different from what they do already.
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Post by wiseclerk on Nov 20, 2013 14:42:54 GMT
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andy2001
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Post by andy2001 on Nov 22, 2013 18:31:29 GMT
I forgot to say when I made the first post on this thread that there is another issue concerning the time period of these "property" loans. Most individuals and businesses would I suspect be looking for much longer periods (10 to 30 years) than FC provide at the moment. This will change the whole model both of funding and borrowing and may not fit well with their current lenders. However lending against existing assets for shorter periods is a much easier thing to manage and is not that much different from what they do already. They could offer 5 year interest only loans, which can then be refinanced latter. Which is something the don't currently do but a much smaller change than offering a 20 year loan.
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Post by mrclondon on Nov 23, 2013 23:09:40 GMT
This property based sector of P2P is soon to get very crowded ! The latest potential entrant to the sector, Crowd Mortgage, say they are planning to launch April 14 in their current crowdcube equity raising pitch. Initially dealing in commercial and Buy to let mortgage contracts, then later residential mortgages. They claim they will offer borrowers "full term" contracts whilst offering "savers" a system that enables their loan rates to adjust along side the ever changing “market” rates. However they also claim on their website "Savers' earn an average of 5% interest". This rate will IMO be a tough sell for a new entrant competing against zopa/ratesetter levels of return. Astoundingly they've raised nearly £35k of equity funding out of their £85k target in just a week. They claim profitability will be reached within 9 months of launch. Burnt fingers anyone ? |
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Post by wiseclerk on Nov 23, 2013 23:44:07 GMT
Did you notice that this is their 2nd funding round on Crowdcube? They already raised 50K in March (in only 2 and a half days)
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duck
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Post by duck on Nov 24, 2013 6:55:27 GMT
That is a real 'retail' approach if ever I have read one, are people frightened away by 'investor'? Is the risk level perceived to be lower?
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Post by jamesmc on Dec 12, 2013 22:00:12 GMT
I agree with the general sense of caution been required.
I am far from convinced that the current property boom is sustainable and with the banks having tightened lending criteria it is possibly only the risker end of the market that will come out to the p2p space. I will probably wait this cycle out before dipping my toes into the property lending market
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Post by batchoy on Dec 12, 2013 22:44:48 GMT
Everybody keeps on about a new property bubble forming, but in IMHO we have never come out of the last one because successive governments are too scared to allow the market to crash properly.
Instead of allowing prices to drop to a point where they become affordable again on realistic multiples of peoples wages as happened in the USA the UK government continued with its failed attempts to make houses affordable by adding distortions to the availability of credit etc which just act to inflate prices. Until the people at the top take on board the fact that house prices are as much affected by the availability of cheap credit as they are the availability of property the domestic property market will remain unstable.
So personally I am going to avoid getting into mortgage type lending.
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andy2001
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Post by andy2001 on Dec 12, 2013 23:11:40 GMT
I agree with the general sense of caution been required. I am far from convinced that the current property boom is sustainable and with the banks having tightened lending criteria it is possibly only the risker end of the market that will come out to the p2p space. I will probably wait this cycle out before dipping my toes into the property lending market Outside London, calling the current market a boom sounds like a bit of an over the top description.
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merlin
Minor shareholder in Assetz and many other companies.
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Post by merlin on Dec 12, 2013 23:27:36 GMT
Everybody keeps on about a new property bubble forming, but in IMHO we have never come out of the last one because successive governments are too scared to allow the market to crash properly. Instead of allowing prices to drop to a point where they become affordable again on realistic multiples of peoples wages as happened in the USA the UK government continued with its failed attempts to make houses affordable by adding distortions to the availability of credit etc which just act to inflate prices. Until the people at the top take on board the fact that house prices are as much affected by the availability of cheap credit as they are the availability of property the domestic property market will remain unstable. So personally I am going to avoid getting into mortgage type lending. To some extent I agree with you but if you look at the costs of putting up a new house you will quickly see that this is the main reason for current price levels. Where I live in West Wales which has very low property prices compared to the SE of England you still find that land to build on still remains at very similar levels to that at the top of the boom. One of the reasons is that God is not making anymore land these days and of course somewhat compounded by rather contorted planning laws. Even agricultural land prices here have been rising by around 7% compound per annum for the last decade.
However there has been a massive disconnect between average wages and average house prices over the last 30 or so years which accelerated in the last decade. When I bought my first semi (three up and three down) in Croydon in 1981 I paid £2750 for it and earned £936 per year. That is a ratio of just under 3 to 1 which is the maximum a building society would lend against wages in those days. Now you could not buy that same property with the same ration you would need a wage of £80k pa. So the real question is: Are property prices inflated or are wages underinflated or perhaps a combination of both?
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Post by batchoy on Dec 13, 2013 6:54:11 GMT
To some extent I agree with you but if you look at the costs of putting up a new house you will quickly see that this is the main reason for current price levels. Where I live in West Wales which has very low property prices compared to the SE of England you still find that land to build on still remains at very similar levels to that at the top of the boom. One of the reasons is that God is not making anymore land these days and of course somewhat compounded by rather contorted planning laws. Even agricultural land prices here have been rising by around 7% compound per annum for the last decade. The thing is I am just not that certain where the cost is coming from for new builds in England and Wales, whether is is land prices or developer's margins, but my brother-in-law has just managed to buy a new build in Northern Ireland that has twice the land as mine (mine was built in the 1940's so is not short on garden), has at least twice the floor area as mine but was bought predominantly on his wife's salary, a care home nurse and the main bread winner. Transport that house here and you are talking £500k, but they have just bought it for £120k
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oldgrumpy
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Post by oldgrumpy on Dec 13, 2013 10:16:52 GMT
Hey, Merlin.... "When I bought my first semi (three up and three down) in Croydon in 1981 I paid £2750 for it and earned £936 per year."
Should I read that as 1961? Or was I robbed in the 1970s, paying £9500 in the Midlands? (I got a mortgage of 2.75 x salary) 
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