Harmoney

[RMJH]

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

[Cool Bear]

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

[myles]

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

[Toukshare]

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?