20 replies to this topic

[DaveHarvey]

Having been playing as a lender in ZOPA for a few months now, I notice a distinct trend in rates, growing over the weekend, then falling again on Monday morning - all makes sense in terms of "Pending" loans tying up funds over the weekend and therefore driving up rates, which fall once a significant percentage are manually declined on Monday.  (if my analysis of this is wrong, please correct me!)

So - does it make sense to set rates to maximise takeup at "Sunday night" rates, OR is there a counteracting argument that smarter, more sensible borrowers will ALSO see this pattern, and thus that borrowers who take loans at higher rates are less financially astute, and therefore more likely to default?

Is there experience (or even better, figures!) to show that higher rate loans (even within a given maket) have a higher default rate, or should we all be chasing these higher rates?

Dave

Edited by DaveHarvey, 13 May 2012 - 20:58.

[Deddington]

DaveHarvey, on 13 May 2012 - 20:50, said:

Having been playing as a lender in ZOPA for a few months now, I notice a distinct trend in rates, growing over the weekend, then falling again on Monday morning - all makes sense in terms of "Pending" loans tying up funds over the weekend and therefore driving up rates, which fall once a significant percentage are manually declined on Monday.  (if my analysis of this is wrong, please correct me!)

I would agree with your assessment. To make it more complex you could add in the effect of long bank holiday weekends and the month end effect of a high proportion of loan repayments coming in during this period.

Quote

So - does it make sense to set rates to maximise takeup at "Sunday night" rates, OR is there a counteracting argument that smarter, more sensible borrowers will ALSO see this pattern, and thus that borrowers who take loans at higher rates are less financially astute, and therefore more likely to default?

I very much doubt there are many lenders watching the Zopa Markets closely enough to see the variation in rates so I doubt there is a correlation on financial astuteness. However the observant lender would take note and try to benefit.

Quote

Is there experience (or even better, figures!) to show that higher rate loans (even within a given maket) have a higher default rate, or should we all be chasing these higher rates?

No figures available to my knowledge. To try to do that analysis would be very difficult IMO as first you would have to establish a base line of what the norm was for rates at the time any particular loan was taken as this varies constantly with changing Market dynamics. So I doubt it could be done.

[figures18]

DaveHarvey, on 13 May 2012 - 20:50, said:

.....and thus that borrowers who take loans at higher rates are less financially astute, and therefore more likely to default?

Borrowers may well accept and apply for a loan at a higher rate but that isn't to say that the underwriters will let it through. Higher rates versus affordability lead to more rejections.

Just having had a quick look at my defaults I see that I have
Matched (loan applied for) on the following days of the week.
Monday - 3
Tuesday - 5
Wed - 1
Thu - nil
Fri - 3
Sat - 2
Sun - 2

My w/end defaults are an A60, B36, B60, C60 and defaults are spread throughout the month from the 1st to the 28th.

Looks like Tuesday's a bad day to lend money! my 5 defaults from a Tues are A*60, B36, 2 x C60 and Y60.  But for me so far Thursday lending is default free. O and not all of my defaults are high rates as I'd consider them in comparison to those still on time.

As Deddington says, you'd need to overlay your default dates/rates against the prevailing lending rates and money on offer at the times in question.  What I see in my defaults isn't likely to match anyone else's spot on.  Your question doesn't have a definitive answer. If you're wary of dabbling on a Sunday in case you increase your chance of defaults feel free to step back till the working week  

Edited by figures18, 13 May 2012 - 21:45.

[blackburne]

figures18, on 13 May 2012 - 21:44, said:

.......
Just having had a quick look at my defaults I see that I have
Matched (loan applied for) on the following days of the week.
Monday - 3
Tuesday - 5
Wed - 1
Thu - nil
Fri - 3
Sat - 2
Sun - 2

.........

As Deddington says, you'd need to overlay your default dates/rates against the prevailing lending rates and money on offer at the times in question. .......

You'd also need to see how many loans you made overall on those days.  If you had 100 loans applied for on a Tuesday, but only 50 on a Monday, on those figures Monday would be a worse day.  It's an interesting idea though. I might even look at my own loans in that way and see what I come up with.

[figures18]

blackburne, on 13 May 2012 - 22:12, said:

You'd also need to see how many loans you made overall on those days.

You're right but that's stretching it too far I think.  Knowing that I match more on a Sat/Sun/Mon and probably Tues I just wanted to see whether my defaults were weighted toward being a weekend warrior and they don't seem to be.

[DaveHarvey]

Thanks all - whilst the formally anaysed data is clearly not available, you've reassured me that there isn't some "well known rule" amongst seasoned ZOPA lenders to avoid the "better" rates if/when available.

Dave

[Gorgeous George]

DaveHarvey, on 13 May 2012 - 23:23, said:

Thanks all - whilst the formally anaysed data is clearly not available, you've reassured me that there isn't some "well known rule" amongst seasoned ZOPA lenders to avoid the "better" rates if/when available.

Dave

The problem with being a weekend warrior is more to do with having loans in processing getting zapped later than would be the case during the week. The benefit (of higher weekend rates) is far smaller now was the case a year or so ago so I tend to set a rate midway between weekend warrior peak and midweek norm.

That said, I made my first withdrawal last week because, IMHO, rates are too low and fees too high. As recently recruited lenders compete to disburse £2K by the end of the year, I expect rates to remain low for a while.

GG

[PeteC]

Gorgeous George, on 14 May 2012 - 07:50, said:

The problem with being a weekend warrior is more to do with having loans in processing getting zapped later than would be the case during the week. The benefit (of higher weekend rates) is far smaller now was the case a year or so ago so I tend to set a rate midway between weekend warrior peak and midweek norm.

That said, I made my first withdrawal last week because, IMHO, rates are too low and fees too high. As recently recruited lenders compete to disburse £2K by the end of the year, I expect rates to remain low for a while.

GG

Agreed I've started withdrawing as well, with my regular savings accounts at the Cheshire & Skipton Building Societies paying 5% and the one at First Direct paying 8% the current return on secure (A*) offers no longer make any financial sense. Ther are now tax Free cash ISAs available that beat current ZOPA rates (if you're a 40% tax payer).

Granted ZOPA is far more fun, but currently in this climate, not worth the risk. Still I'll keep watching.

Pete

[propman]

IMHO if you are happy with the rates, week-time loans are a good idea. I believe that rates are likely to decline further and so "good" rates for weekends now are unlikely to be matchable after a few weeks. rates that are usually only matched on a Sunday are more likely to be zapped and you are likely to find yourself with offers that you have to withdraw or reduce the rates. As rates decline, the date of the offer becomes more important (see the variation in loan sizes matched in A*36 at the moment between a new offer and a mature one!) so you might not want to have to lose queue position. As such, I try and keep my rates to match most evenings with just a small amount available to Easter Egg higher rates when available.

However, never chase rates beow where you are comfortable, if this means only weekend loans, so be it.

JMHO

- PM

[Oldnick]

figures18, on 13 May 2012 - 21:44, said:

Borrowers may well accept and apply for a loan at a higher rate but that isn't to say that the underwriters will let it through. Higher rates versus affordability lead to more rejections.

Just having had a quick look at my defaults I see that I have
Matched (loan applied for) on the following days of the week.
Monday - 3
Tuesday - 5
Wed - 1
Thu - nil
Fri - 3
Sat - 2
Sun - 2

My w/end defaults are an A60, B36, B60, C60 and defaults are spread throughout the month from the 1st to the 28th.

Looks like Tuesday's a bad day to lend money! my 5 defaults from a Tues are A*60, B36, 2 x C60 and Y60.  But for me so far Thursday lending is default free. O and not all of my defaults are high rates as I'd consider them in comparison to those still on time.

As Deddington says, you'd need to overlay your default dates/rates against the prevailing lending rates and money on offer at the times in question.  What I see in my defaults isn't likely to match anyone else's spot on.  Your question doesn't have a definitive answer. If you're wary of dabbling on a Sunday in case you increase your chance of defaults feel free to step back till the working week  

Looks like Tuesday's been the worst for defaults for me too. Each line below represents one default.

Loan date - Day - Market - Loan - Rate% - Average Zopa this market and day - Total loans this day - Loans in this market this day

18/04/10----Sun------A36--------3k-----8.00----------------------------8.34-----------------------------12--------------------------5
20/04/10----Wed-----C36--------3k----12.20-------------------------12.19-----------------------------16--------------------------2
05/05/10----Tue------A36--------9k------8.10---------------------------8.48-------------------------------1--------------------------1
17/08/10----Tue------A36------10k------8.30---------------------------8.33-------------------------------1--------------------------1
07/12/10----Tue------A60------15k------8.50---------------------------8.52-------------------------------2--------------------------1
22/11/11----Tue------S60------15k------6.94---------------------------6.90-------------------------------1--------------------------1

[Gricehead]

There was some analysis done in another thread earlier this year to try and debunk the myth that higher rate loans "went bad", but it wasn't conclusive (and I can't find the thread now, so not much help!)

Edit to add Stats:

I have 4 Tuesday, 1 Wednesday and 1 Friday default - all different to the ones Oldnick posted above.

Edited by Gricehead, 16 May 2012 - 08:10.

[PeteC]

figures18, on 13 May 2012 - 21:44, said:

Borrowers may well accept and apply for a loan at a higher rate but that isn't to say that the underwriters will let it through. Higher rates versus affordability lead to more rejections.

Just having had a quick look at my defaults I see that I have
Matched (loan applied for) on the following days of the week.
Monday - 3
Tuesday - 5
Wed - 1
Thu - nil
Fri - 3
Sat - 2
Sun - 2

My w/end defaults are an A60, B36, B60, C60 and defaults are spread throughout the month from the 1st to the 28th.

Looks like Tuesday's a bad day to lend money! my 5 defaults from a Tues are A*60, B36, 2 x C60 and Y60.  But for me so far Thursday lending is default free. O and not all of my defaults are high rates as I'd consider them in comparison to those still on time.

As Deddington says, you'd need to overlay your default dates/rates against the prevailing lending rates and money on offer at the times in question.  What I see in my defaults isn't likely to match anyone else's spot on.  Your question doesn't have a definitive answer. If you're wary of dabbling on a Sunday in case you increase your chance of defaults feel free to step back till the working week  

I've always wondered if there is any correlation between the day of a loan the default rate so checked ours, certainly seems slightly biased to the weekend, though as I've mentioned here before in this forum, the 30th April 2011 was a particularly bad day for us

Sat 30 April 2011 Written Off
Sat 30 April 2011 Arrangement
Mon 10 January 2011 Arrangement
Sat 05 January 2011 Arrangement
Sat 16 October 2011 Collections
Tues 24 May 2011 Arrangement
Sat 30 April 2011 Arrangement

Pete

[sl75]

PeteC, on 20 May 2012 - 11:57, said:

I've always wondered if there is any correlation between the day of a loan the default rate so checked ours

Don't see any correlation myself - here's my list of dates on which loans were arranged which are now in "default" state, having originally matched the A/B/C/Y markets (i.e. excluding listings which used a different matching process, and excluding duplicates where I matched a borrower more than once).
Wed 01 Sep 2010
Tue 11 May 2010
Sun 28 Mar 2010
Tue 02 Mar 2010
Sun 21 Feb 2010
Tue 17 Nov 2009
Sat 08 Aug 2009
Sun 26 Jul 2009
Tue 04 Nov 2008
Sun 12 Oct 2008
Sat 11 Oct 2008
Wed 10 Sep 2008
Fri 22 Aug 2008
Sat 16 Aug 2008
Tue 12 Aug 2008
Tue 15 Jul 2008
Sat 12 Jul 2008
Thu 10 Jul 2008
Fri 27 Jun 2008
Mon 23 Jun 2008
Mon 23 Jun 2008
Fri 13 Jun 2008
Sat 31 May 2008
Wed 28 May 2008
Mon 26 May 2008
Wed 14 May 2008
Mon 28 Apr 2008
Tue 15 Apr 2008
Sat 29 Mar 2008
Wed 06 Feb 2008

Totals:
Sun 4
Mon 4
Tue 7
Wed 5
Thu 1
Fri 3
Sat 6


The main thing that I'd suggest to avoid based on the above list, is having loans whose lending year is 2008..... but I think that's already widely known

Edited by sl75, 21 May 2012 - 08:56.

[paulnkaty]

As a reasonable new lender, and knowing the rates here were not particularly higher than some fixed rate isa accounts i still remain confused how some lenders are lending at some of the low rates offered, take the C shorter category, 1% FEE and 5.2% defaults, = 6.2% lenders making offers at about 9.5% after default and fee would get just 3.3% before tax or at 20% tax just £2.64 gain per £100 invested, a rate thats easily beatable in the high street isa's. Have i worked out this wrong?? seems too low to be viable to me on this example to consider some of these catagorys??

[CKemahli]

You are right in thinking this is strange, I too have never understood how people make sense of lending to those risks at those rates. One must either assume that they, don't really understand Zopa...expect defaults to be tiny...pay no tax....

Stick to the markets you are happy with. Currently we have a glut of new money sloshing around whilst this campaign is going on, it should slowly be lent out and hopefully rates will increase again.

My general move is 6.5% in A* Short. I rarely chase the high rates as I am comfortable at that level.

[Toffeeboy]

paulnkaty, on 30 May 2012 - 16:49, said:

As a reasonable new lender, and knowing the rates here were not particularly higher than some fixed rate isa accounts i still remain confused how some lenders are lending at some of the low rates offered, take the C shorter category, 1% FEE and 5.2% defaults, = 6.2% lenders making offers at about 9.5% after default and fee would get just 3.3% before tax or at 20% tax just £2.64 gain per £100 invested, a rate thats easily beatable in the high street isa's. Have i worked out this wrong?? seems too low to be viable to me on this example to consider some of these catagorys??

Hi Paul

Just to make your view even worse it would actually be £1.60 per £100 invested as the bad debt is not tax deductable so the actual calculation is 9.5% less the 1% fee so 8.5% is taxed at 20% and then less the 5.2% bad debt.

There are two main explantations assuming that the lenders understand Zopa and they are the two that CK menioned being that they don't pay tax so get a net rate of 3.3% or don't believe the bad debt will be as high as Zopa estimates. To be fair it isn't as high as Zopa estimates but it is possible it could get that high.

The scary thing is if there are any 40% tax payers in that market as if bad debt hit the estimates then they would actually lose 0.1% after tax

[blackburne]

paulnkaty, on 30 May 2012 - 16:49, said:

As a reasonable new lender, and knowing the rates here were not particularly higher than some fixed rate isa accounts i still remain confused how some lenders are lending at some of the low rates offered, take the C shorter category, 1% FEE and 5.2% defaults, = 6.2% lenders making offers at about 9.5% after default and fee would get just 3.3% before tax or at 20% tax just £2.64 gain per £100 invested, a rate thats easily beatable in the high street isa's. Have i worked out this wrong?? seems too low to be viable to me on this example to consider some of these catagorys??

There is also the 'social lending' aspect.  This was made much of in the early days, though you won't find many posters on this forum (a tiny minority of lenders) who subscribe to the idea.  Nevertheless, I am sure that there are some lenders who are reasonably well off, and are happy to give a hand to those less fortunate than themselves by by-passing the banks, and who are happy to help others so long as they get most of their money back.

[Gricehead]

CKemahli, on 30 May 2012 - 16:57, said:

Stick to the markets you are happy with. Currently we have a glut of new money sloshing around whilst this campaign is going on, it should slowly be lent out and hopefully rates will increase again.

Although there isn't much data for proper statistical analysis, I would be very surprised if there is much downwards upwards movement of rates until the very end of the year. People have many other things on their minds than finances during the summer (probably more so this year). Not for nothing does the financial sector swear by "Sell in May, go away. Come back on St Legers' Day". Expect £5m on offer by the end of next week, and don't be surprised if new records for on offer amount are being broken by August (current record is £7.4m)

Quote

My general move is 6.5% in A* Short. I rarely chase the high rates as I am comfortable at that level.

At that rate, you're probably still seeing some action intermittently. As a 40% tax payer, it wouldn't pay for me to go that low. Each to their own, as they say.

Edited by PoohBah, 31 May 2012 - 14:43.

[Pedlarjak]

They say you should always favour "C*ck up" over "Conspiracy" theories - and for that reason I would assume that the reason rates are so low is mostly as a result of people not understanding the system properly.

[Gricehead]

Just realised there's a key word wrong in my post above, and it's too late to edit it.

Gricehead, on 31 May 2012 - 09:06, said:

Although there isn't much data for proper statistical analysis, I would be very surprised if there is much upwards movement of rates until the very end of the year...