Wednesday, Apr 29, 2009
Real interest rates
Zopa: Zopa Home page
I've said before that Zopa, by the way it works will better reflect market interest rates. Still not involved myself in any way, but interesting to note the 8.8% average return over th last year.
Posted by inbreda @ 01:30 PM (791 views) Add Comment
9 Comments
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1. mr_smith said...
well I do it. the rates are dropping like a stone since just before christmas. the high rate reflects that last year they were prety high when interest rates were 5% and credit was super suqeezed.
I've also been hit by shed loads of defaulters (as you would expect). which kills you returns. so basically there is (as always) no such thing as a free lunch
2. Astreix said...
Rates on zopa are unsecured lending rate to individuals and should reflect the much higher risk. If either the borrower didn't pay (they sell your debt to an agency which pays 10p in a pound) or zopa went bust (agreement still enforceable, but collection will be a nightmare in practice) you don't have the £50,000 FSA guarantee to fall back on as you would have if case of bank deposit.
3. stillthinking said...
Zopa is the equivalent of a 100% capitalised bank i.e. they are lending purely from a capital base (if you were to take the view that Zopa is a bank rather than a middleman). Banks create matching credit/deposit pairs from nothing, credit creation using their capital base to absorb defaults, basically a large multiple of their capital base. Accordingly, a bank would always make a larger profit and be able to offer a lower rate than Zopa.
Zopa's future success depends on lending non-existent money being more expensive than lending "real money", which will never be true.
4. bellwether said...
Surely only a fool/someone who can't othewise get credit would borrow money at 10% p/a. Can't help thinking it is exploiting people that really just need to stop spending.
5. inbreda said...
Must admit - the reason I have not got involved is for the reasons quoted above. It does seem that Zopa is no more than a building society, the main difference is that if a BS messes up on its assessment of credit risk, it goes out of business. If Zopa mess up, it is the individual fronting up the money that gets hit. Has always made me too nervous - particularly in the current environment - to get involved. Nice idea - shame about the reality.
6. techieman said...
yep nice idea - but not only has the horse bolted but its in a field somewhere in the dordogne!
7. hpwatcher said...
Surely only a fool/someone who can't othewise get credit would borrow money at 10% p/a. Can't help thinking it is exploiting people that really just need to stop spending.
As with credit cards.....
8. mander said...
Maybe a little bit of Cosa Nostra. If the loan is not paid back is the lender going to get his gun out?
9. Millaise said...
Many people borrowing through Zopa are low risk, and, sensibly, just don't want to pay banks' exhorbitant charges and rates for an unsecured loan. Fair enough. I just trialled a quote for a £2k loan from NatWest at http://www.natwest.com/personal/loans.ashx. Result 21.5% APR! The issue of Zopa not being as competetive as a bank operating on fractional reserve doesn't impinge on the decision to loan through it; surely the choice is whether you will receive more interest with your cash on deposit with a bank, or by loaning it through Zopa? For me the biggest downside to Zopa is the length of time your money must tied up with no access.