johni
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Post by johni on May 4, 2019 9:51:22 GMT
If you look at the rates being offered the haircut has begun. The rates to borrowers is the same or slightly higher. The rates offered to lenders has dropped significantly. Ratesetter will say this is due to large amounts of ISA money coming in. This is not true as the spread has increased massively. This is Ratesetter boosting their profits at lenders expense. All the changes made have meant lower returns for greater risk. Investors are the mugs here as far as Ratesetter are concerned. Ratesetter are taking no risk as they are lowering your rates. So any money put in to boost the protection fund is YOUR money which is being siphoned of as we speak. Lower returns higher risk that's the Ratesetter of today
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mikeb
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Post by mikeb on May 5, 2019 19:09:30 GMT
If you look at the rates being offered the haircut has begun. Technically, the "haircut" is where existing loan contracts have their interest reduced to a level below that of the original contract. What you have observed is that new contracts being formed from now, onwards, are at a lower level. That's just Ratesetter adjusting their profits/provision fund input/market forces etc.
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Post by propman on May 7, 2019 15:29:11 GMT
Johni, while I sympathise with your assessment, this started some time ago. However, for some time the increased "margin" between APR and AER has been hidden by higher APR rates. Assumig that basically APRs are set by the market, then RS has been increasing risk to cover the shortfall. This was necessary as a quick review of the defaults relative to PF contributions shows that for some time loan defaults have exceeded expectations at the time the loans were written (as opposed to the expectations at the end of the year recorded as expectations when loans were written).
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Post by p2plender on May 13, 2019 6:38:44 GMT
Maybe they are and maybe they're not 'tinkering', but you know what? It still beats the p--- poor rates offered by the banks etc so I don't mind 'tinkering' until the rates are revised downwards too far. Then I'll be off.
Worth noting RS AUS rates have been hammered of late too.
The hunt for yield goes on.
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wapping35
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Post by wapping35 on Jun 9, 2019 8:49:31 GMT
I see RS have publish (on Friday 7th) some updates/details and changes to the PF process. members.ratesetter.com/noticeboard/new_methodology_for_calculating_expected_provision_fund_outflowsmembers.ratesetter.com/noticeboard/interview_with_michael_hoare,_chief_credit_officer A quote from above: Our projections are based on modelling methodologies and are prepared by our Risk Analytics team who report into me, and I am in turn accountable to the Executive Credit Committee and our independent Board Risk Committee. We are also looking at whether our projections can be externally analysed in future.
i.e. Still awaiting on an external independent audit of the expected inflows and outflows.... That said the information is useful and IMO important for investors to read and understand as a window on the risks we are taking...That said I do wonder how many investors (especially the ones not looking at this forum) actually do read this kind of info...
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r00lish67
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Post by r00lish67 on Aug 14, 2019 9:33:24 GMT
Changes to the Provision Fund reporting. ----------------- RATESETTER is planning to introduce stress testing to its provision fund over the next financial year. <snip> Given that the net forecast position of the PF is not even 1% of the loans under management (0.78%), it'll be interesting to see how much stress could really be taken.
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jlend
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Post by jlend on Aug 14, 2019 11:03:02 GMT
I hope RS test out any ideas for the new reporting on a selection of lenders to ensure it meets their needs.
I don't know if this change is one that has been asked for by a cohort of lenders or if this is something that has been instigated by RS themselves.
Personally I hope there is some sort of "target" coverage which is no less than the current target coverage ratio which has already been tweaked from a 125% to 150% range to over 125%.
From my understanding a level of stress is already built into the assumptions that RS update every quarter. These assumptions are used in the calculation of the coverage ratio. It will be interesting to see what extra stress is being considered over and above this in any reporting.
Publishing any metrics using the old and new methodology for 6 months would go some way to alleviate concerns about what the new reports mean.
IMHO it is somewhat unfortunate that the change is being considered now given the level of uncertainty into how the economy will perform and the impact on p2p loan books.
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Post by propman on Aug 14, 2019 12:09:19 GMT
Changes to the Provision Fund reporting. ----------------- RATESETTER is planning to introduce stress testing to its provision fund over the next financial year. <snip> Given that the net forecast position of the PF is not even 1% of the loans under management (0.78%), it'll be interesting to see how much stress could really be taken. You are referring to the "Provision Fund Cash". In practice they are due regular payments from most loans so at least a portion of the "expected future fund inflows" will also be available.
What I would like to see is that they consider the timing of expected calls on the fund as part of the stress testing. At present the "Expected Future Losses" is net of expected recoveries on defaulted loans. By definition these will be after the defaults are paid out and so are only available against significantly later defaults, so in practice, if lending ceased, the cumulative defaults would be expected to be higher than that shown even if there were subsequent inflows to offset them. As a result, the liquidity of the Fund could be compromised despite an ultimately solvent Fund.
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r00lish67
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Post by r00lish67 on Aug 14, 2019 12:49:05 GMT
Given that the net forecast position of the PF is not even 1% of the loans under management (0.78%), it'll be interesting to see how much stress could really be taken. You are referring to the "Provision Fund Cash". In practice they are due regular payments from most loans so at least a portion of the "expected future fund inflows" will also be available.
What I would like to see is that they consider the timing of expected calls on the fund as part of the stress testing. At present the "Expected Future Losses" is net of expected recoveries on defaulted loans. By definition these will be after the defaults are paid out and so are only available against significantly later defaults, so in practice, if lending ceased, the cumulative defaults would be expected to be higher than that shown even if there were subsequent inflows to offset them. As a result, the liquidity of the Fund could be compromised despite an ultimately solvent Fund.
Nope, well not quite, I'm referring to 'Provision Fund cash + expected future inflows - expected future outflows'. That totals £6.9m or 0.78% of the loans under management. Agree with your second point though - just because there's theoretically enough in the PF doesn't mean that it couldn't become insolvent due to recoveries lagging defaults as you say. Of course, one would expect RS to take some sort of action before that point though..
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Post by propman on Aug 14, 2019 16:14:38 GMT
Nope, well not quite, I'm referring to 'Provision Fund cash + expected future inflows - expected future outflows'. That totals £6.9m or 0.78% of the loans under management. Agree with your second point though - just because there's theoretically enough in the PF doesn't mean that it couldn't become insolvent due to recoveries lagging defaults as you say. Of course, one would expect RS to take some sort of action before that point though.. As said before, in that case that is not the forecast position unless no new loans are made (as income and bad debt all based on loans already formed). Sorry for not checking the calc.
As for "taking Action", If they are still able to keep arranging loans at current level, I agree, but that is not a stressed situation. If investor confidenec too low to attract new funds leading to net withdrawals, assuming that they don't find a magic source of borrowers that have higher risk adjusted rates, there may be little they can do.
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sd2
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Post by sd2 on Sept 17, 2019 11:05:50 GMT
If you look at the rates being offered the haircut has begun. The rates to borrowers is the same or slightly higher. The rates offered to lenders has dropped significantly. Ratesetter will say this is due to large amounts of ISA money coming in. This is not true as the spread has increased massively. This is Ratesetter boosting their profits at lenders expense. All the changes made have meant lower returns for greater risk. Investors are the mugs here as far as Ratesetter are concerned. Ratesetter are taking no risk as they are lowering your rates. So any money put in to boost the protection fund is YOUR money which is being siphoned of as we speak. Lower returns higher risk that's the Ratesetter of today You don't have to lend via ratesetter. You can sell up and put your money into a savings account. at least they are safe. I think the interest rates are excellent given MY perceived risk. Why don't you put your money into a higher interest p2p. Some pay 12 to 15% Bargain! PS they are not making a profit. Ratesetter that is. I would like them to do so. One of their backers is Woodford. Won't be getting any extra cash from him for a while!
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sd2
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Post by sd2 on Sept 17, 2019 11:11:12 GMT
Do you work for ratesetter?
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johni
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Post by johni on Sept 17, 2019 13:17:34 GMT
If you look at the rates being offered the haircut has begun. The rates to borrowers is the same or slightly higher. The rates offered to lenders has dropped significantly. Ratesetter will say this is due to large amounts of ISA money coming in. This is not true as the spread has increased massively. This is Ratesetter boosting their profits at lenders expense. All the changes made have meant lower returns for greater risk. Investors are the mugs here as far as Ratesetter are concerned. Ratesetter are taking no risk as they are lowering your rates. So any money put in to boost the protection fund is YOUR money which is being siphoned of as we speak. Lower returns higher risk that's the Ratesetter of today You don't have to lend via ratesetter. You can sell up and put your money into a savings account. at least they are safe. I think the interest rates are excellent given MY perceived risk. Why don't you put your money into a higher interest p2p. Some pay 12 to 15% Bargain! PS they are not making a profit. Ratesetter that is. I would like them to do so. One of their backers is Woodford. Won't be getting any extra cash from him for a while! You are right nobody has to lend on Ratesetter. But my post was made back in May since the further cuts to rates have been announced ie 3%, 4%, and 5% all fixed. How much of your money has earned these rates over the last 2 years on Ratesetter? Bearing in mind base rates have gone up twice. I have managed to keep above 6% in 5 years 5% in 1 year and rates between 4% and 6.5% in rolling. My Point was about how Investors are taking the risk yet Ratesetter are reaping all the rewards and I was proved right
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sd2
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Post by sd2 on Sept 17, 2019 15:04:23 GMT
But they aren't profitable?
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jlend
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Post by jlend on Sept 17, 2019 15:25:05 GMT
Do you work for ratesetter? No
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