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fru-gal

Peer-To-Peer Lending Heralds Mortgages Without Banks

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I like the idea of p2p lending, but it's deflationary. No money is created when it's lent with p2p lending. For that reason, I think TPTB will only permit a fraction of lending to be undertaken this way just to show they're tech-savy, otherwise the current financial system will implode (faster than it is now).

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I like the idea of p2p lending, but it's deflationary. No money is created when it's lent with p2p lending. For that reason, I think TPTB will only permit a fraction of lending to be undertaken this way just to show they're tech-savy, otherwise the current financial system will implode (faster than it is now).

What's not to like. Sounds like the perfect antidote to the monopoly of the big banks and the corrupt financial system we currently have.

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All fine provided I don't have to bail out the lenders or borrowers. When they lose money the should be dragged out their homes and repossessed - both lenders and borrowers.

If peer-to-peer lending is a future disaster waiting to happen, which is my view also, then know this - no one forced anyone to lend or borrow for business purposes.

That some dead-money savers, are waiting for such financial distress to occur, so as to take position/equity at more sensible prices - and perhaps even see them forced to put their homes on the market and seek lower asking prices (for HPC).

Run campaigns NOW, protest to some authority, if you are anti-capitalist and against the freedom of individuals making their own commercial decisions; which are usually higher risk anyway, and too often outbidding those of us who are patiently waiting for better value, and distorting values in the wider commercial world where others fear to tread at such prices. Not all the violins 'they're all victims' stuff after the event.

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Mortgages without banks eh?

I remember the days before the banks were involved in mortgages, which were the preserve of building societies. You saved for a deposit with a building society and when you had saved enough they would advance you the money to buy a house. Actually, it worked rather well.

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All fine provided I don't have to bail out the lenders or borrowers. When they lose money the should be dragged out their homes and repossessed - both lenders and borrowers.

Absolutely! Bailouts are theft!

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The building society should never have been destroyed in the 90s by demutualisation.

P2P for mortgages is yet another regressive step. In the 19C, it was quite common for wealthy individuals to lend for mortgages to others. We should prefer banks, as credit is created de novo and the money supply does not contract when pavements are made.

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What's not to like. Sounds like the perfect antidote to the monopoly of the big banks and the corrupt financial system we currently have.

It's one of the alternatives to traditional banking that could've risen a whole lot more if zombie banks hadn't been bailed out.

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The "money" created when banks mortgage properties is their slice of devaluing a currency.

If they weren't allowed to do this then any "inflation" would be real, created by actual improvements in efficiency, i.e. making less do more.

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I like the idea of p2p lending, but it's deflationary. No money is created when it's lent with p2p lending. For that reason, I think TPTB will only permit a fraction of lending to be undertaken this way just to show they're tech-savy, otherwise the current financial system will implode (faster than it is now).

P2P is not deflationary. It increases amount of money (bank credit) which is actively in circulation. Money shifts from saving accounts (inactive money) to current accounts of the borrowers and then circulates until parked in a bank account as savings or used to pay off a loan from a bank. P2P lending is inflationary as it increases demand.

It is not good for banks as it squeezes profits of their lending business.

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What's not to like. Sounds like the perfect antidote to the monopoly of the big banks and the corrupt financial system we currently have.

P2P lending isn't actually a bad idea.

in years gone by before the monopolisation by the big banks it was credit unions(+ trade unions), and building societies that were doing this.

many a worker would have tied accomodation as part of the job, which would be bought by said union/society and then either leased back or sold on at reasonable interest rate.

P2P without some kind of indemnity sounds a bit daft, but with a small premium to cover risk of default/non payment+legalities the concept has legs-it's sure to be better terms than are presently offered by the cartel.

perhaps the trade unions should focus less on stirring up industrial strife,and start capitalising on this again,as workers start to feel the pinch and can affor less on an individual basis,then they need to use collective bargaining for some of the bare necessities in other essentials for their subscribers.

..it could also be tied into better deals for gas/electricity/municipal services for their customers due to economies of scale.

it shouldnt(and doesn't really need to) turn into an "us and them" type conflict.

..they need to use their heads and think like the employers do..ie why should I waste money on something I won't get a return on?...in fact that's just smart shopping isn't it?..why should you go to somewhere and spend an extra £50 on a telly or a fridge that you could get either better quality/faster/cheaper elsewhere?

you can convince a good employer to invest in a couple of £m of kit if they can see they could recover that initial outlay in3-4 years,and be cash positive on it by year 5.(it's a bit of a fine art though, as market conditions can and do change)

..the union bit presently does not fully accept the latter part of the above statement.

Edited by oracle

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P2P is not deflationary. It increases amount of money (bank credit) which is actively in circulation. Money shifts from saving accounts (inactive money) to current accounts of the borrowers and then circulates until parked in a bank account as savings or used to pay off a loan from a bank. P2P lending is inflationary as it increases demand.

It is not good for banks as it squeezes profits of their lending business.

Unless all these P2P lenders get banking licenses, then they're doing full-reserve banking. The "proper" banks operate fractional-reserve banking so are creating lots of new money when they lend.

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Unless all these P2P lenders get banking licenses, then they're doing full-reserve banking. The "proper" banks operate fractional-reserve banking so are creating lots of new money when they lend.

Spot on.

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The way I see it, P2P have realised that they can still make a healthy profit by charging a small fee (normally 1%) so making less money on fees but making more money by drawing in more investors precisely because their fees are low. They also have the whole "social" aspect that people buy into, which is a lot more personal than the banks - that your money is genuinely helping someone else rather than going to pay for bankers bonuses or tax avoidance schemes.

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A very superficial survey of what is available tells me;

They won't lend for 'owner occupiers'.

They lend for 3 years max.

'Lendinvest' is an example of this. It may be in its infancy, and it may evolve further. However in its current format, it has the whiff of backing BTLs about it......

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Unless all these P2P lenders get banking licenses, then they're doing full-reserve banking. The "proper" banks operate fractional-reserve banking so are creating lots of new money when they lend.

Isn't that what was normal a few decades ago before Glass Steagal was repealed?

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[quote name="fru-gal" post="1102673823" timestamp="1424547433

your money is genuinely helping someone else rather than going to pay for bankers bonuses or tax avoidance schemes.

They're charging interest, right at a commercial rate? It's not a charity? It's just rich people investing.

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Unless all these P2P lenders get banking licenses, then they're doing full-reserve banking. The "proper" banks operate fractional-reserve banking so are creating lots of new money when they lend.

I don't think it's necessarily deflationary, but OP article is odd - reads like an advert, then refers to a paper (I assume by RICS) then back to an advert.

Adding whatever £bn when full-reserve, unsecured with no deposit insurance is certainly a different to now though. Guess deflationary/not would depend on how much p2p channels state/private money creation into the system vs. how much new money banks are creating and channeling into the system (or perhaps today how much state-underwritten money creation banks are channeling via deposit insurance into the system). If the amounts differ hugely then the reason for the difference would probably hint as to the ultimate conclusion of whether it implodes or not.

If p2p just spreads as unregulated lending with tax perks that will lead to consequent prices. But I think full reserve means less elastic money supply and what crowdfunding/p2p really do (or should do) is cut all creditors out of bail outs. So in an underlying deflationary trend, or recession, the effects would be properly symmetric - investor appreciation of piles-of-bricks liquidity risk and a big bail in. Great by me but not sure for house prices - unless the state steps in again offering money in return for private promises.

Edited by northshore

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Unless all these P2P lenders get banking licenses, then they're doing full-reserve banking. The "proper" banks operate fractional-reserve banking so are creating lots of new money when they lend.

When you borrow money from a bank and put it in a saving account then there is no additional demand and no impact on prices. You could borrow trillions and it wouldn't make any difference.

Another example, let's imagine that there is one guy who owns all the money and keep it in a saving account. There is no demand, no one is spending money because no one has money apart of the "rich" guy who doesn't want to buy anything. If the "rich" guy decides to lend the money through P2P then borrowers can start spending money and create demand.

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...

P2P without some kind of indemnity sounds a bit daft, but with a small premium to cover risk of default/non payment+legalities the concept has legs-it's sure to be better terms than are presently offered by the cartel.

...

I lend with RateSetter. A quick look on their website suggests that they currently have £317,459,400 on loan. They then have what they call a Provision Fund which seems to be currently valued at £12,078,504 to cover bad debts. So it currently looks like defaults of 3.8% then punters start taking losses.

I've been lending in the 3 year market with them since May 2014. Annualised return thus far is 4.1%.

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I like the idea of p2p lending, but it's deflationary. No money is created when it's lent with p2p lending. For that reason, I think TPTB will only permit a fraction of lending to be undertaken this way just to show they're tech-savy, otherwise the current financial system will implode (faster than it is now).

woah!

An asset is created, exactly like a "real" mortgage ( the loan ) and the loan is settled at outset by a transfer of means of exchange, and repaid over time with interest.

the question is, will the mortgage be resold, borrowed against, collateralised or hypothecated as "real" ones are?

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I borrow with Ratesetter cos I'm broke.

Only a few thousand to go and you b****** won't get anymore interest off me

Lending rates are up quite a bit over the last week or so also. The 3 year queue now has only £542 at 5.9% before moving into £98k at 6.0%. In comparison since I started RateSetter tell me I'm achieving 4.6%. The difference between this 4.6% and my actual 4.1% is that it can quite often take a while to get your money into the market.

Genuine question how have you found them as a Borrower? As a lender it's all been very easy and pretty slick doing exactly what it says on the tin so far.

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Genuine question how have you found them as a Borrower? As a lender it's all been very easy and pretty slick doing exactly what it says on the tin so far.

Very fair. I actually took two loans out with YOU RENT SEEKING B******** and repaid the first well before the term. The repayment process was quick and simple, and as I did it first in stages, then a lump sum, they reduced my ongoing payments first. I'm grateful for the flexibility of the credit actually.

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Very fair. I actually took two loans out with YOU RENT SEEKING B******** and repaid the first well before the term. The repayment process was quick and simple, and as I did it first in stages, then a lump sum, they reduced my ongoing payments first. I'm grateful for the flexibility of the credit actually.

Since I've been lending I've seen quite a few early repayments. It's quite a nice system from a lenders perspective also. I get an email to say a loan has been repaid early and if I don't intervene the money automatically gets lent out again in the same market. Unlike many bank loans including mortgages I have no problem with my lenders paying their loans back early.

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