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Harmoney retail RAR has been trending down for sometime now. Currently 13.07% (lowest since mid-2015) and heading toward the 12s. Scorecard 1.5 starting to bite?
Attachment 9234
I'm down from high 16s to 14.99% this morning. It's taken 2 months to drop that quickly. That's over 2600 loans and 21 months. I'm weighted mostly in Cs and Ds. I get the feeling we're making hay while the sun shines. These kinds of returns will attract competition wanting to undercut them because investors are accepting 2.5% in the bank or on rental properties. O/seas returns in these sorts of investments are not as good as they are here.
IMO the only way you can work out your actual growth is get your balance one year ago and compare it with today's balance. Of course you'll need to add up funding available, in funding and outstanding principle but if you do, I think you may be shocked by your actual growth, mine is about 7.5% compared with a RAR of almost 16%. DYOR
Harmoney's RAR formula looks to be reasonably sound but doesn't seem to allow for the "dead time" between the time the borrower pays Harmoney and when Harmoney credits the money to your account. Also, it's not the whole difference, but the figures you've calculated are after tax but Harmoney's RAR figure is before tax.
I'm currently at 7.6% return for 6 months i.e. ~ 15.2% for 12 months after tax (lowest rate). This includes a startup period of a little over 3 months to invest $100K (so it should improve). I know I've got some significant losses to come as more defaults kick in but my returns are looking to be significantly higher... XIRR at just under 18% (after tax) - very consistently, current RAR at 17.35%pa. Compounding with the lower tax rate makes a significant difference to the overall returns.
If you are investing new money or drawing on returns a simple balance comparison will not give you an accurate picture of your returns (using XIRR will).
Also writeoffs as a % of interest are creeping up (for me) and it is too early for this to be from recent shift in grade mix.
An increase to the minimum wage from the incoming Govt. may improve existing borrowers ability to pay off debt, perhaps reducing defaults?
Anyone see any major positive/negatives for P2P Lending from the incoming Govt.?
Does a falling NZD effect P2P lending? (More expensive to purchase from OS so perhaps local small businesses could do better - some are P2P borrowers).
https://ci5.googleusercontent.com/pr...%7D_spacer.png
This from Zopa relates to UK but found it interesting all the same.
Update on Zopa investinghttps://ci5.googleusercontent.com/pr...%7D_spacer.png Since 2010 the UK has seen continually improving consumer credit performance leading to historically low levels of bad debt.
In early 2016, we at Zopa started to see some early signs of a possible change in this trend. It now looks like the change is real:
https://ci5.googleusercontent.com/pr...%7D_bullet.png https://ci5.googleusercontent.com/pr...%7D_spacer.png Publicly available data suggests consumer default and insolvency levels are reaching levels which are more consistent with historic norms prior to 2010; and
https://ci5.googleusercontent.com/pr...%7D_spacer.png https://ci5.googleusercontent.com/pr...%7D_bullet.png https://ci5.googleusercontent.com/pr...%7D_spacer.png The Bank of England in their credit conditions survey stated “Lenders reported that default rates on both credit cards and other unsecured lending to households were reported to have increased significantly in Q2 [of 2017].”
https://ci5.googleusercontent.com/pr...%7D_spacer.png While we are not immune to this industry-wide trend, the impact on lending at Zopa is limited. This is because we identify and focus on low risk borrowers, we have been cautious in our underwriting in anticipation of increases in default rates, and, since early 2016 in response to very early indications, have been more and more cautious in our lending criteria.
More recently, we have reduced the amount of lending in our higher risk, higher return D-E markets (which are included in the Plus product). We are also taking steps to attract more lower risk customers thus increasing the proportion of A and B rated loans.
What this means for new investments
As a result of the increasing proportion of lower risk, lower return loans we expect to approve, we are expecting a lower targeted return of 4.5% for new investments in Plus. Similarly, the targeted return for new investments in Core will be 3.7% reflecting a shift towards lower risk loans in the A-C markets.
It is important to note that the target average return levels for new investments in each risk market (A–E) have not changed materially. The change in overall return is a result of changes in mix. For example, the proportion of D and E loans in the Plus product would go from 30% until now, to 10-15% in the future.What this means for existing investments
For existing loans, we are expecting slightly higher losses. For existing investments in Safeguarded loans, we expect no impact on loans as Safeguard coverage is expected to remain above 100% (including future contributions).
In addition to changes in loss expectations, we are also seeing an increase in early repayments from borrowers. While this means that investors get their money earlier, it also reduces interest income and thus returns.
If these trends in early repayment rates and credit losses continue, we would expect that for existing investments in non-Safeguarded loans originated up to August 2017, realised returns will be lower than original expectations: 3.5% compared to 3.9% in Core and 5.6% compared to 6.3% in Plus.
A