Peer-to-peer lending sites: MSE guide discussion

KeepOnKnitting

Just out of curiosity, has anyone successfully managed to withdraw from Zopa? I turned off reinvesting in April 2019 as I suspected I was drawing nearer to needing the money out for my house deposit. I have managed to get around half out from repayments, and it's not the end of the world if the rest stays there, but I was just looking for the experience of others. I applied for a loan sale on April 1st, and no movement yet.

charliewhatsit

Masonic  You completrely misunderstood me.  I did not say that the Govt would default on bonds.  I said there was a risk of capital loss, which is not the same thing.  The price of Bonds increase when interest rates go down.  The price decreases when interest rates go up. So if interest rates had to go up, say because of a run an the pound, or a sudden increase in inflation, you risk a caital loss.  This market is not one for amateurs.  National savings are risk free and a better alternative to bonds for parking money in my opinion.

masonic

charliewhatsit said:

Masonic  You completrely misunderstood me.  I did not say that the Govt would default on bonds.  I said there was a risk of capital loss, which is not the same thing.  The price of Bonds increase when interest rates go down.  The price decreases when interest rates go up. So if interest rates had to go up, say because of a run an the pound, or a sudden increase in inflation, you risk a caital loss.  This market is not one for amateurs.  National savings are risk free and a better alternative to bonds for parking money in my opinion.

Then you are talking about trading bonds, or holding funds trading bonds. You can buy individual bonds directly and hold to maturity to avoid the risk of capital fluctuations. Alternatively, you can buy an index fund that holds bonds to maturity, and providing you do so for a sufficiently long period of time, you'll achieve the same effect. But most people who want certainty about their return will buy individual bonds and hold to maturity.

In a thread about P2P investing, bonds sit between P2P and savings in both complexity and risk, so anyone invested in P2P would hopefully not be described as "amateur".

I agree that bonds are less simple than cash savings accounts, but I would suggest that the best place for consumers to park cash is in the FSCS protected savings account(s) offering the best rate, which is unlikely to include National Savings. HM Treasury has also pledged to back the FSCS in the unlikely event it should run out of money.

charliewhatsit

Hi Masonic.    Buying bonds and holding to maturity?  Well OK, it depends at what price you buy.  To my mind, buying bonds mid term is best left to the professional so a fund would be the answer, yes. Otherwise you have to buy at issuance, which us normal mortals cannot do, they are offered by Govt to institutions.  And holding to maturity in any case, could mean 5 years.  What happens if you need the money urgently and the price has fallen?  Maybe you have lost your job in a pandemic.  In normal circumstances buying at the best rate from an institution is sensible, but I would suggest that the odd 0.3% is not worth having for parking short term money, when interest rates are so low, particularly as there are often conditions in place regarding withdrawals.You and others may disagree;   but I was talking about short term deposits to eventually place in the stock market,  So maybe I didn't make myself clear.  Sorry about that.  I would just point out, that Nationwide, in which I had short term deposits in their loyalty saver account, cut their instant access rate from 1.,1% to 0.25%.  An insult in my opinion.  I would rather lend my short term money to the government at 1.1%, even at 0.7% which was the origional intention when rates went down recently, than a building society that treats its customers with such contempt.  And a lot of them do.

masonic

Yes if you've got some short term cash you need to park somewhere for a few weeks/months then NS&I is as good a place as any, especially if you have >£85k to park somewhere. Clearly we are talking at cross purposes as I was referring to money being pulled out of P2P and moved into some other asset class for the long term. If that happens to be equities (and not bonds/cash long term), then a savings account is definitely the best place if feeding into the stockmarket more gradually. In that case the main objective is getting your hands on it immediately if needed, so an account like Marcus would be a good fit as withdrawals are instant and the rate is still reasonable at 1.2%. We can certainly agree that sticking money in a bond fund for just few weeks/months is not a good idea.

HHarry

Just had a Ratesetter email that confirms interest rates are being cut by 50% for the rest of the year.

That gives a highest rate of 2% in 'Max' - which really doesn't seem enough with the associated risk.

KBZL

Ratesetter have been hit by massive lender demand to sell loans and withdraw funds too. This will not help

Ehube

masonic said:

Currently, requests on the Access market are being processed from 10th March, while they've got as far as 12th March for requests on the 5 year market, so liquidity on the 5 year market is higher than Access.

Today, a week later from the quote above on 28 March, RateSetter are working on clearing release of investment requests in the Access market from 12th March and are telling people it will be "at least 6 months" and "probably longer" before money requested released today  is actually released and made available to withdraw. To those who are asking if it is a good time to open a RateSetter account just think about that. Especially after the announcement about reducing interest rates by 50%.

Effectively, as RateSetter freely admit, money in this market you would like to release and withdraw will still likely be being lent to new borrowers in 6 months and there's nothing you can do about it! Least of all get your money back.

I'm grateful I have reduced my investment in RateSetter over the years but annoyed the last part is caught up. Can only imagine what situations some people have ended up in.

masonic

Ehube said:

masonic said:

Currently, requests on the Access market are being processed from 10th March, while they've got as far as 12th March for requests on the 5 year market, so liquidity on the 5 year market is higher than Access.

Today, a week later from the quote above on 28 March, RateSetter are working on clearing release of investment requests in the Access market from 12th March and are telling people it will be "at least 6 months" and "probably longer" before money requested released today  is actually released and made available to withdraw. To those who are asking if it is a good time to open a RateSetter account just think about that. Especially after the announcement about reducing interest rates by 50%.

Effectively, as RateSetter freely admit, money in this market you would like to release and withdraw will still likely be being lent to new borrowers in 6 months and there's nothing you can do about it! Least of all get your money back.

I'm grateful I have reduced my investment in RateSetter over the years but annoyed the last part is caught up. Can only imagine what situations some people have ended up in.

This is what happens when you lend people's money out on terms of up to 5 years, yet provide those lenders with a product that allows access in normal market conditions. In the absence of normal market conditions, that liquidity can dry up completely, since the only way an investment is going to be released is if (1) the borrower makes a repayment; (2) another investor steps in to take over the loan(s); (3) the borrower defaults on the loan and the provision fund steps in and makes a repayment.

Given that an interest haircut has just been triggered owing to the provision fund suddenly needing to be recapitalised, it is likely a lot of borrowers are unable to make their normal monthly repayments and the provision fund is covering much of the money being returned to lenders.

With recent developments, the chances of borrowers repaying early or investors putting new money into P2P are vanishingly small, so I think remaining investors should brace themselves for having their capital locked up for many months, if not years.

Sailtheworld

We're seeing a run on P2P. The T&Cs people signed up to ensure it's a slow run but it's a run nonetheless. Maybe the taxpayer will come to the rescue - they usually do when unwise lending decisions are made.