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  1. #451
    Senior Member
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    Sep 2015
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    4% Return for investing in Home Loans at this point in time - No Thanks - What if the house value drops by 15% and ONLY 100K in Reserve Fund!!


    5% Return on a Business Loan - NO Way - Investing in Business Loans at this time with only ONLY 100K in Reserve Fund!!


    6% - 7% in Personal Loans - Maybe - Have 500K in Reserve Fund ( best risk ) however better returns elsewhere in P2P



    SM.jpg


    SM RF.jpg

  2. #452
    Senior Member
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    Don't get me wrong.... SM is still the ONLY P2P Lender I have had NO Capital Losses with.... ( Thanks to their Persoanl Loan Reserve Fund )

    It's just their offerings have changed \ evolved over time ( where other P2P Lenders have not so much ) and what they now offer Investors is no longer attractive to myself....

  3. #453
    Squirrel Mortgages (Verified) JB@Squirrel's Avatar
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    Nov 2015
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    Hi Saamee,

    You're assessing a reserve fund against low LVR lending secured over property. They are totally different things.

    The average expected credit loss rate on a residential house book is 0.0005%. Over $150 billion of prime residential mortgage have been sold to investors in Australia with no investor losses. Even in Ireland during the GFC the loss rate of residential mortgages was only 5% and that was with a 50% drop in house prices and 1 in 10 households defaulting and 50% of new lending with deposits less than 20%. The UK had a loss rate 0.50% over the same timeframe.

    Banks are lending at 2.70% on home loans, and we are paying investors 4%. The only reason we can do that is we are targeting older borrowers with very low LVRs who the banks tend to neglect. With the amount of equity in these properties we don't need reserves for losses, just to cover any arrears. The reason we are publishing examples in the blog is to add colour to the types of loans we are doing so investors can see that for themselves. It's purely to educate the market.

    The Business Property Loan is lending on simple residential builds with unconditional buyers on the end of the transaction deposit paid. Benefit of buyer, deposit paid, 20% equity in transaction, and guarantee from build franchise.

    These products won't be for everyone and certainly not right for anyone chasing higher risk/returns.

    As for us being desperate, hardly.

    Squirrel write over $1 billion of mortgages each year as a mortgage broker. We can now provide some of those through to the investor platform and already have $10m that we have pre-funded with our own facilities to pass down to the platform. We are keen to get investors engaging in this new investment class and so are promoting it.

    Alternatively we could just get a big wholesale facility funding them at <4.00% and not bother about retail investors i.e. do a Harmoney. We're publicly committed to P2P which means we have to spend money promoting it and encouraging it to gradually grow.

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