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Post by wyndstryke on Aug 23, 2017 14:05:44 GMT
Thanks, will check them out :-) I wouldn't bother - if there is a downturn it would affect everyone (and probably Zopa less than most since they mainly focus on people with the best ratings). It's a risk to the entire sector not just one platform.
... Personally ... I'm staying in. In terms of my non-P2P investment I have already mostly moved it out of the UK since the brexit vote.
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nrw
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Post by nrw on Aug 23, 2017 14:10:32 GMT
But Zopa is only returning a projected 4.5%
= 2.6% premium on cash on a 1-year deposit
= 1.43% premium after income tax @ 45%.
That return simply doesn't balance the risk IMHO - many other secured lending platforms are returning twice Zopa's unsecured rate.
Funding Circle's new model at 7.5% is far more appealing to me.
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Post by wyndstryke on Aug 23, 2017 14:22:15 GMT
... That return simply doesn't balance the risk IMHO ...
The reason the return is dropping is because they're reducing the risk profile of their borrowers. Reduced risk = reduced rates, and higher risk = higher rates. That 7.5% is because the risk is higher, doesn't make it a better deal.
Tax is another calculation of course - assuming you haven't hit the lifetime limit, at 45% you are probably best putting it into a drawdown pension instead & claim relief before they repeal it.
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Post by WestonKevTMP on Aug 23, 2017 14:41:55 GMT
... That return simply doesn't balance the risk IMHO ...
The reason the return is dropping is because they're reducing the risk profile of their borrowers. Reduced risk = reduced rates, and higher risk = higher rates.
Pah. Thats the PR talking. Alongside the irrelevant background noise on FCA and economic factors (which were really about car finance on PCP).
The returns might be dropping in the future on new loans if they change their risk criteria. But the returns are dropping on everyone's current portfolio because they got the bad debt and early repayment estimates wrong, that's the probable truth.
The returns are 0.7% lower annualised. Over the lifetime of loans, that's a bad debt around 2% higher. If they were estimating around ~5% bad debt (we don't know this), then the bad debt is coming in at 7% over lifetime of loans. That is a bad big miss.
Anecdotally lenders have seen this in the portfolios, where they've been reporting monthly capital losses on another thread. You can also see it in the analysis of the downloadable loanbook.
Kevin.
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Post by point5clue on Aug 23, 2017 14:49:25 GMT
Personally I am hoping that they do successfully migrate to a lower risk lower return offer - I have lots of money in Shares (almost exclusively global index trackers), and some small sum in bonds (actually Lifestrategy20 as it seemed a good fit for my timescale) and I look to P2P as somewhere between cash and shares that is not bonds.
For my P2P investment I want growth above inflation, but not significantly above vs. the risk of capital losses. I'll leave that to shares. Bonds still have the risk of significant capital losses so I want to diversify.
My timescales are 5 plus years and I want the money eventually as income not capital so absolute liquidity is of less concern than for some.
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nrw
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Post by nrw on Aug 23, 2017 15:17:45 GMT
The reason the return is dropping is because they're reducing the risk profile of their borrowers. Reduced risk = reduced rates, and higher risk = higher rates.
But the returns are dropping on everyone's current portfolio because they got the bad debt and early repayment estimates wrong, that's the probable truth.
That's the definite truth, by Zopa's own public admission this week. Returns are dropping because they failed to accurately assess bad debt - risks are not dropping on the current loan book. For a business which has been trading for over a decade, this is a real concern.
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nrw
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Post by nrw on Aug 23, 2017 15:19:58 GMT
For my P2P investment I want growth above inflation, but not significantly above vs. the risk of capital losses. IMHO this is a naive approach - the returns are low but the risk remains. P2P loan books are a LONG way off a 'low' risk of capital loss. I am prepared to accept this risk, but the returns need to be higher than Zopa's to justify it. If you are looking for capital protection, look elsewhere my friend.
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Post by moody28 on Aug 23, 2017 16:01:11 GMT
I started winding down a month ago - see my post and thread Time to Look elsewhere?
I will leave a small sum in but pull repayments out monthly, this will take a year to get where I want but no fees and I can drip feed into other things. I like Zopa but I wont put in more than a modest sum and keep diversified.
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ashtondav
Member of DD Central
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Post by ashtondav on Aug 23, 2017 16:50:17 GMT
4.5% is what the poor s*ds on RS have been accepting for months.
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robski
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Post by robski on Aug 23, 2017 17:05:10 GMT
4.5% is what the poor s*ds on RS have been accepting for months. With a provision fund that's not oranges to oranges
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nrw
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Post by nrw on Aug 23, 2017 17:15:07 GMT
4.5% is what the poor s*ds on RS have been accepting for months. With a provision fund that's not oranges to oranges It is oranges to oranges IMHO. The 4.5% is the rate net of expected defaults. A provision fund is just a ticking timebomb - as in the event of a significant downturn there are likely to be insufficient monies to cover the losses. RS's returns can only go down from the quoted rate, at least Zopa's can go up. Provision funds are nonsense - hence the FCA is clamping down on them. It's all about transparency (a term which RS is not acquainted with).
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Post by beeje13 on Aug 23, 2017 21:36:51 GMT
With a provision fund that's not oranges to oranges It is oranges to oranges IMHO. The 4.5% is the rate net of expected defaults. A provision fund is just a ticking timebomb - as in the event of a significant downturn there are likely to be insufficient monies to cover the losses. RS's returns can only go down from the quoted rate, at least Zopa's can go up. Provision funds are nonsense - hence the FCA is clamping down on them. It's all about transparency (a term which RS is not acquainted with). Don't understand the timebomb term for a PF. At the same advertised rate, you would rather have a PF than not. Expected Losses could triple at Ratesetter and the PF would cover all capital shortfall. Loans would then be pooled so that individual investors won't lose out. This is arguably not p2p even if it's a good idea. RS are not the only platform with this protection. FCA are not clamping down on provision funds. Plenty of evidence to debunk that myth.
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robski
Member of DD Central
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Post by robski on Aug 24, 2017 7:39:20 GMT
It is oranges to oranges IMHO. The 4.5% is the rate net of expected defaults. A provision fund is just a ticking timebomb - as in the event of a significant downturn there are likely to be insufficient monies to cover the losses. RS's returns can only go down from the quoted rate, at least Zopa's can go up. Provision funds are nonsense - hence the FCA is clamping down on them. It's all about transparency (a term which RS is not acquainted with). Don't understand the timebomb term for a PF. At the same advertised rate, you would rather have a PF than not. Expected Losses could triple at Ratesetter and the PF would cover all capital shortfall. Loans would then be pooled so that individual investors won't lose out. This is arguably not p2p even if it's a good idea. RS are not the only platform with this protection. FCA are not clamping down on provision funds. Plenty of evidence to debunk that myth. Totally agree, plus the way RS works they will reduce the interest paid to support the PF if needed, yes it reduces return but equally only when/if needed The RS model is still more pooled and less every man for himself. You only have to look at some of the threads on here to see how peoples returns can vary a lot on Zopa+, some even negative for many months. Thats far below the performance of RS. Some people seem to love Zopa, I used to use it but found the rates some of my money was being lent out for was absurdly low. I pretty much failed consistently to get the returns they indicate, and thats before the higher rates kept repaying and the lower rates ran to term. As I stopped lending I see my rates continuing to fall as that kicks in more and more. I was very unimpressed with Zopa and dont get how some seem to think its the best thing since self buttering toast  Not that I think RS is perfect by any means, but in the short term if there was a shock rise in defaults, your moneys far safer in RS and quick thinking would probably allow you to get most of it out before there was any chance of lock in due to lots of people trying to do the same.
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