sl125
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Post by sl125 on Mar 18, 2015 11:02:08 GMT
I am a... flipper (I know, I know... hiss the villain).
Or at least, I was a flipper until about 3 weeks ago. I've bought nothing to flip on in 3 weeks, and I've now sold most of my flippable holdings.
It seems that the good days of buying at the highest marginal rate on the primary market with a view to selling at a premium on the secondary market are coming to an end.
Three factors appear to be at play:
1. More and more investors with very deep pockets and very fast bots are bidding and outbidding each other from the highest marginal rates downwards.
2. Fewer borrowers are closing early. Whether this is as a result of the first factor (since the average rate will now start at around 15% and drift down as time goes on, rather than starting much lower and drifting down only marginally), or because FC are advising borrowers to wait util the end, is not clear.
3. As very few flipping opportunities are now available, the flipping investors have a surplus of cash to invest, thereby perpetuating the first 2 factors.
So, a question for all those other flippers: what's your view? are you expecting the cycle to swing back, or are you coming to the same conclusion as me: it was good while it lasted, but markets will always revert to mean at some point.
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markr
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Post by markr on Mar 18, 2015 11:47:03 GMT
I think that the existence of the whole loan market may be partly responsible for fewer loans ending early. If borrowers are told "If your loan is taken by a whole loan lender your rate will be X%, otherwise you'll have to take your chances on the auction market", they will have been given a sort of target expectation and are more likely to wait to see if they reach that target.
As for flipping, I've only really been a "leisurely flipper", selling off older loan parts to fund buying newer ones, because I like playing with Fiery Comestibles. I've become a property cashback flipper of late but still only on a small scale "buy what I'm prepared to keep but if it's sells then great" level. I think some of the big flipper money went there too, but poor liquidity and reducing cashback has made that less tempting, which will also feed into your first 2 factors.
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Post by davee39 on Mar 18, 2015 12:03:54 GMT
There is a new A+ loan which claims to be 'Vantastic'. It will be for the borrower when the loan settles at MBR. Lenders will get 4.4% after fees and defaults. Even the £200k 'b' rated loan initially filled by the tall one has headed down to earth.
There is clearly a demand from lenders and a lack of supply from the Circus. A £2m property loan is a lot more profitable to them, for a lot less hassle, than a series of small business loans. I am surprised that the bank tie ups and the supposed need for SME finance is still only feeding such a dribble of outright rubbish.
At present flippers are not needed to fill loans, for sophisticated lenders the exit signals are flashing as better deals are available elsewhere.
Whether we like it or not change seems to be inevitable. The little loans might sit better on other smaller platforms while FC move into the larger asset backed loan space. For now flipping seems to be an excellent way of earning nothing and for every experienced lender who goes elsewhere there will be a dozen new investors desperate to get money into loans at any price. Perhaps we are being softened up for a move to 100% of loans being fixed rate.
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Post by yorkshireman on Mar 18, 2015 12:10:57 GMT
Originally I wasn’t a flipper but after a number of loans going down the pan in questionable circumstances, (Bent Lawyer and Air Con Artist in particular), I started flipping.
It depends on what return you consider acceptable, I’ve achieved 12.16% and 11.68% on my 2 accounts since January 1 albeit on considerably reduced volumes.
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Post by yorkshireman on Mar 18, 2015 13:25:09 GMT
I just don't want to lend unsecured, at any rate, when double digit secured lending is available on other platforms. Spot on! That sums up my philosophy completely.
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Post by grumbledore on Mar 18, 2015 13:33:53 GMT
On sl125's second point, I wondered back sometime in 2014 if borrowers were being advised to let the auctions runs as there were a couple of weeks that I started to feel that very few loans were being accepted early so I checked the borrower FAQs on Flaming Cabbages' website thinking this would tell borrowers to let the auction run but it said something along the lines of 'you can accept early or let the auction run to see if the rate reduces'. I checked again recently and the FAQ is still the same.
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Post by goldservice on Mar 18, 2015 15:58:17 GMT
I just don't want to lend unsecured, at any rate, when double digit secured lending is available on other platforms. What are these other platforms, please? I've never managed to find them. I looked at AC but found that there were few lending opportunites, that investing more than a few hundred pounds would take ages and/or compromise my diversification, that the quoted rates of 15-18% related to the penalty interest rates that AC charges late borrowers and that those rates accrue but don't necessarily get paid and I'd like to know what rates lenders actually get over a year etc etc.
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Post by GSV3MIaC on Mar 18, 2015 16:34:58 GMT
I flip too (well, my bot does), and like SL125 I think the good days are over until/unless Flummoxed Completely manages to step up the loan pipeline faster than the institutions can eat it. Basically flippers are doing the underwriting / market making job on FC (taking more than is advisable if the rate is high enough, with a view to reducing over time), but if someone else is ready willing and able to fill the loans at MBR, or close to it, and there are no more loans to fill, then the money isn't needed and isn't going to get invested. We shall have to see. It may be that FC are discouraging early closes, we'll never know (transparency isn't something they major on, although they lip serve it a lot), but if at the end of each day all the available loans are 100% filled, flipping ain't going to fly .. in its heyday there were a dozen or more unfilled loans on the platform at any time (I mean real loans, not property mega£ tranche 6s).
The institutions are now eating ~50% of all FC loans, and perhaps 75% or more of the non-property ones (ignoring the BBB, which is another 10% out of the partial loans).
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coop
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Post by coop on Mar 18, 2015 16:55:54 GMT
I shall still flip but to avoid prolonged exposure to loans as much as earning the premium. Easy 2-3% gains aren't there for he taking at the moment!
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Post by goldservice on Mar 18, 2015 18:51:45 GMT
Many thanks for the detailed reply - very useful.
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blender
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Post by blender on Mar 18, 2015 21:10:05 GMT
Should that not be 'goldplacesetting'?
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Post by goldservice on Mar 19, 2015 9:53:02 GMT
Should that not be 'goldplacesetting'? It's the avatar that's wrong - suggestions welcome.
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blender
Member of DD Central
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Post by blender on Mar 19, 2015 10:36:44 GMT
Should that not be 'goldplacesetting'? It's the avatar that's wrong - suggestions welcome. This is classy, if you don't mind 'borrowing' from the net. That's where I found my chameleon though I can change colour all by myself. 
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Post by goldservice on Mar 19, 2015 11:06:51 GMT
Thank you, blender - have a gold star!
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mv
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Post by mv on Apr 16, 2015 14:54:13 GMT
Out of interest, what tactics work best for flipping the 2% cb property loans?
Do you go for a small margin by offering some incentive (in addition to losing 0.25% to FC) but listing at the top of the buyers rate ranking?
Do you try and get in early and offer at par in order to exploit future auto bidders?
Or add some premium and hold till term unless a random mug comes along?
BW
Matt
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