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Thread: Harmoney

  1. #4411
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    Quote Originally Posted by RMJH View Post
    Ah, I think you are not comparing to 1.5! The rate reductions are much less... but shows how much times have changed since launch
    Unfortunately, he IS comparing to 1.5 and it is that drastic!!

    Worst still, the default rate is up for C4 to E5. For example under 1.5, E2 interest rate is 27.49% and annual chance of default is 3.73%. Under 1.6, E1 interest is now 22.49%, a drop of 5% while the annual default has gone up to 5.56%.

    So we are being hit both ways! RAR will definitely drop. But with Reserve bank interest rate approaching zero, it is rather expected.

    Regards
    CB

  2. #4412
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    Quote Originally Posted by Cool Bear View Post
    But with Reserve bank interest rate approaching zero, it is rather expected.
    I'm surprised it has taken so long.

    It will be interesting to see if loan volume picks up after these changes go through - not including re-writes, which may well see a fairly significant rise in available funds

  3. #4413
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    Quote Originally Posted by Cool Bear View Post
    So we are being hit both ways! RAR will definitely drop. But with Reserve bank interest rate approaching zero, it is rather expected.
    I think that's what is driving the interest rates drop from a commercial point of view. I am guessing that most lending institutions (including banks) have had to drop their rates. And (for those of use with mortgages) while we are happy for our mortgage rates to drop down to 3.45% or thereabouts, this also means that borrowing rates across the board are also dropping.

    Because as Cool Bear says, a drop in the interest rate for a particular grade doesn't mean that it has less chance of default as before, comparatively. A similar chance of default percentage now corresponds to a lower interest rate, so we lenders are being ask to risk more for the same return.

    Interestingly, Harmoney also claims that they now have more than 5 years worth of data regarding risks and are now able to fine-tune their expected default rates, risk analysis etc. That may be true also?

  4. #4414
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    Worked out the net impact on my current portfolio. My current weighted average interest rate on loans is 20%... superimposing new interestrates on revised dashboard it will be 17%

    As per coolbear comments above, default rates unlikely to have changed in the last 2 years... that 3% reduction just a full hit to investor return.

    I wonder how the insto's feel about the drastically reduced income with practically no change to the underlying risk?

  5. #4415
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    Quote Originally Posted by leesal View Post
    Worked out the net impact on my current portfolio. My current weighted average interest rate on loans is 20%... superimposing new interestrates on revised dashboard it will be 17%

    As per coolbear comments above, default rates unlikely to have changed in the last 2 years... that 3% reduction just a full hit to investor return.

    I wonder how the insto's feel about the drastically reduced income with practically no change to the underlying risk?
    Inevesting Interest Rates have gone down across the board, everywhere you look.... Why would P2P be any different?

    If they get no customers becuase their % Rates are too high - Investors would not be happy either!!

  6. #4416
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    Quote Originally Posted by Saamee View Post
    Inevesting Interest Rates have gone down across the board, everywhere you look.... Why would P2P be any different?

    If they get no customers becuase their % Rates are too high - Investors would not be happy either!!
    Do you not feel that consumer finance in the unsecured space has a degree of inelasticity of demand?

    Recall Myles mentioning Gem charging AER of 49%; and the unregulated loan shark shops continue to be a problem. OCR hasn't fallen off a cliff, its reduced by 0.75% in 3 years.

    Intrigued what prompted harmoney to go this hard in their reduction. If they are supposedly making "no money" off loan applications; and investing their own money into the platform? Maybe the insto's are happy with 7% RAR instead of 10%, wonder how they'll like it when the market tanks.

  7. #4417
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    Quote Originally Posted by leesal View Post
    Worked out the net impact on my current portfolio. My current weighted average interest rate on loans is 20%... superimposing new interestrates on revised dashboard it will be 17%

    As per coolbear comments above, default rates unlikely to have changed in the last 2 years... that 3% reduction just a full hit to investor return.

    I wonder how the insto's feel about the drastically reduced income with practically no change to the underlying risk?
    I agree - I was aiming for a weighted average lending rate of around 20%, which put me at a C2 "centerpoint". I will now have to get down to a D5 (!) centerpoint, which obviously carries a lot more defaults risk. I too think the reduction in rates are drastic. Down 5% in some grades is not fine-tuning, it's a complete change of tack.

  8. #4418
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    Quote Originally Posted by Toukshare View Post
    I agree - I was aiming for a weighted average lending rate of around 20%, which put me at a C2 "centerpoint". I will now have to get down to a D5 (!) centerpoint, which obviously carries a lot more defaults risk. I too think the reduction in rates are drastic. Down 5% in some grades is not fine-tuning, it's a complete change of tack.
    Sorry I doubted your numbers, it just seemed way too radical! Agree this is a dramatic repricing of risk. The base rate component of these loans is practically immaterial on the higher grades.

  9. #4419
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    No problem - actually my new centerpoint is D3, not D5. Still a big step down from C2.

  10. #4420
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    Toukshare,

    You may find the following two charts of interest - these are my current loan distribution and all time defaults (ignoring grades with small loan numbers):

    grades.png

    defaults.jpg

    Using Harmoney platform average default rates can be well off if you apply any form of 'sane' selection process to your loans. It should be pretty obvious why I favour D's and E's when I can get them. Lower grades may not necessarily be lower risk. Hard to compare when everyone's selection process is different.

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