Ratesetter - What Have You Done? (Maximum Earning/Lending Rates for Investors)

jason101 on 09/07/2020 - 22:10
Last edited 10/07/2020 - 10:28 by 1 other user

Have I been misguided into thinking Ratesetters core business was matching borrowers to lenders at mutually agreed rates?

Do I read correctly that Ratesetter now SETS the maximum rate for lenders to lend at irrespective of buyer demand?

Is this completely against the philosophy of the site and peer to peer lending principals?

Marketing spin aside - why are they doing this ?

My only assumption is that due to COVID they are currently being hit with some very shaky borrower requests who are prepared to pay very high interest rates, Ratesetter don't want their platform over run with bad debts and risky loans which may excessively draw down on their bad debt provisioning fund….

Related Stores

Plenti (Previously RateSetter)

• 

  Caped Baldy on 09/07/2020 - 22:38

  Rates have been high due to the volatility so it was possible to get up close to 10% interest rates for the monthly rolling.
  Still better off going the longer term loans if your risk appetite is low compared to other investment avenues.

• 

  Cluster on 10/07/2020 - 00:17

  +4

  The corporate spin from RS is appalling. Yes, delivering more value to investors by providing a lower return. What's not to love?

  Price controls rarely work well or as intended, and RS is essentially trying to fix the market. If lending rates were too high then borrowers would dry up, forcing investors to lower their asks. Rather than letting the free market do its work, RS is trying to manipulate the rates directly.

  According to RS's statistics the number one use for borrowed funds is debt consolidation. Since most credit cards still charge 20%+ any rate significantly lower than that provides value to the customer. Perhaps RS is getting cold feet with upcoming post JobKeeper bad debts and wants to fatten up the provision fund?

  • 

    OzCheapo on 10/07/2020 - 12:38

    It's not trying to fix the market, it's fixing investor returns. They can still charge higher interest rates but pockets the difference.

    They're actually correct, delivering more value to investors who own the company not the investor pool.

• 

  Starcraftmazter on 10/07/2020 - 00:40

  This opens them up to competition from other participants that follow a more market-driven model. This is the one reason I've always liked ratesetter, but now they have gone back on it.

  • 

    SharedSugar on 10/07/2020 - 07:41

    +3

    Which other participants?

• 

  QuickdraW on 10/07/2020 - 08:31

  Imagine they don't like the monthly rate being higher than the 5y but this feels like they are overstepping their role as facilitator. Where do people suggest moving to now?

• 

  whooah1979 on 10/07/2020 - 09:33

  +2

  Vote with your wallet. Get your last loans locked in before July 14 then pull the funds out when they mature and invest in other markets.

  • 

    brad1-8tsi on 10/07/2020 - 13:26

    That's pretty much what I will be doing.

• 

  netjock on 10/07/2020 - 10:10

  My only assumption is that due to COVID they are currently being hit with some very shaky borrower requests who are prepared to pay very high interest rates, Ratesetter don't want their platform over run with bad debts and risky loans which may excessively draw down on their bad debt provisioning fund….

  Assess credit quality is Ratesetter's job. Regardless of rates on the market.

  Capping rates is the fact not enough money for lending is going into the platform. That is why monthly rolling went up to 8%. Capping it means even with $0 investor / lender inflow borrowers will be offered what seems like a good rate but take a long time to fill.

  BHP yield is 4.8%, so why would you go Ratesetter (other than just rolling market)? Yes your capital is at risk, so is your capital at risk at Ratesetter. Look at Ratesetter UK, they halved their rates due to COVID (to put into provision fund), even before COVID the rates were bad. Changes to UK was also all loans are pooled. Ratesetter UK also up for sale because the margins are getting worse (all the good credit borrowers are probably also tapped out).

• 

  whooah1979 on 10/07/2020 - 11:48

  The 1 month rolling was ~8.3% during the lockdown.

  Today we’re announcing an important change to our lending markets to help make investing with RateSetter even simpler, faster and more predictable.

  From Tuesday 14 July we are changing the maximum rates at which you will be able to create lending orders in each lending market.

  We expect these changes will deliver important benefits for our investors including reduced rate volatility, increased availability of early access transfer and increased ability to attract creditworthy borrowers. Learn more about our approach to this change in this blog post.

  The new maximum rates for each lending market will be as follows:
  • 1 Month Rolling: 4.4% p.a.
  • 3 Year Income: 5.5% p.a.
  • 5 Year Income: 6.2% p.a.
  • National Clean Energy: 6.0% p.a.
  • SA Renewable Energy: 4.4% p.a.

  Here’s what you need to know about how the new maximum rates may affect you:
  • These changes will not impact the rates you earn on existing investments already on loan.
  • Any existing orders on market or reinvestment settings that are at a rate above the relevant maximum rate will be cancelled. You will be notified in a separate email if your lending orders or reinvestment settings have been impacted.

  While the maximum rates may be lower than some investors have previously received, we think that the new maximum rates will continue to see investors receive attractive returns, particularly in light of the strong credit performance of RateSetter’s loan book over the last five years (including the Covid-19 period) and the significant decline in the Reserve Bank cash rate over the last 24 months.

  If you wish to provide any feedback or have any questions about these changes, please don’t hesitate to contact us at [email protected]

  Kind regards,

• 

  jason101 on 10/07/2020 - 19:32

  +1

  My hunch may have been at least partially correct, I received a reply from their helpdesk (note comments about the creditworthiness of the borrowers):

  Thank you for your email.

  We value feedback from all of our investors, so thank you for taking the time to contact us, it is appreciated.

  I'm sorry that you are disappointed with the new changes that are going to be implemented.

  These changes are intended to offer more stability and predictability to your lending experience as well as ensuring we attract creditworthy borrowers.

  RateSetter will be reviewing the maximum rates regularly moving forward. While we retain discretion on the maximum rates set, in determining the maximum rate, we will consider several factors including but not limited to:
  • Rates at which we can continue to attract creditworthy borrowers;
  • Ability for us to increase the investment opportunities for our investors; and
  • Ensuring that we can continue to charge appropriate levels of risk provisioning to the Provision Fund.
  Investors will be notified if any subsequent changes to maximum rates are made.

  We understand that changes to maximum rates are important, so we are committed to keeping all investors well informed of any changes.

  For more information regarding this change, please see the recent blog post

  If you have any further questions please don't hesitate to get in touch.

• 

  team teri on 11/08/2020 - 18:26

  +3

  I know, it's a month old post, but still worth a comment: the "vote with your feet" is working. They already upped the maximum 5-year rate slightly last week and still, there are fewer funds on offer than loans waiting. Pretty soon they will have to up maximum rates again for both 3 and 5 year.

  I acknowledge that interest rates around the world are near all time lows, but at the same time risks for lenders are a lot higher now than a year ago.

  I for my part correctly predicted what was going to happen. I had an account for a business, for that one I used the early access transfer within hours of receiving the email about the ridiculously low maximum rates. Soon after that option was gone until now due to the 'minimum remaining lending orders' requirement.

  For my private account I can wait out the existing investments, but I am not making new ones at the current interest rate levels. I see lots of early principal repayments though, it would appear lenders who can get loans elsewhere are moving to cheaper options in droves.

  Those early repayments were common long before the changes Ratesetter made. Perhaps their intention in making those changes was to reduce the frequency of early exits. Maybe in the long term that will even work.

  For now they left us investors in a bind. The risk/reward profile at Ratesetter is no longer attractive…

  • 

    whooah1979 on 11/08/2020 - 20:25

    Their 1 month rolling was ~8% a few months ago. These is no reason to lend them funds at 1/2 the rate.

    • 

      team teri on 11/08/2020 - 20:29

      I was never interested in the 1 month rolling. It's lower rates, but you still only get your money back if they find someone else to replace it. Same risk as longer terms for lots lower rewards now.

      Of course 8% would be ok, but then you'd have to ask: who's paying 8% for a short term loan? Or rather: 11% or 12% by the time Ratesetter has added their additional fees.

      • 

        whooah1979 on 11/08/2020 - 20:33

        The 1 month rolling was 8.5% - 8.7% in March when the markets crashed. I suspect that people wanted the money to pump the SPX. That was a great buying opportunity.

        These is no reason to keep lending them funds at 1/2 the rate. There are other instruments out there right now that may give better ROI.