https://www.ratesetter.com/blog/introducing-our-new-products
Have read through this and think I get it but don’t really get the practical changes for Lenders.
Anyone got a tl;dr?
Is it riskier or less lucrative now?
It’s less lucrative and to be honest I can’t believe there isn’t more discussion around it.
I’ve invested in RS for almost 3 years. My system was to invest a lump in their 5 year market, and have the repayments invested in the rolling market. The logic was to balance high returns with being able to access a portion when I needed it fee-free. My primary lump in the 5 year market was at 5.6% and my average in the rolling market was 3.4%.
By standardising the rates to 3, 4, and 5% they have clearly reduced potential returns. At the time of writing the only borrowers offers in each market are 2.9, 3.9, and 4.9% respectively.
What is interesting(!) is the borrowers offers are identical amounts in each market. What this screams to me (maybe it’s common knowledge?) is that Ratesetter is lending all of the money at the highest rate they can, paying the investor the rate they ‘choose’ and pocketing the difference. They have to make money somehow, sure. But I feel like I’m being mugged off. I’m taking on the risk by lending my capital, and Ratesetter skims off the returns.
You also now can’t opt to have your repayments from one market reinvested in a different market - if you want 5% returns, your options are to not automatically reinvest repayments at all, or to have it reinvested in the same market and force you to pay 90 days’ interest to access the funds.
My returns took a hit when they first changed up how the rates were calculated earlier this year but now I am really quite unhappy with RS. I’d move to a different p2p provider but I haven’t yet found one I’m comfortable with.
I’d really like to hear about other peoples’ experiences with Zopa and Funding Circle. Does the lack of a provision fund make much material difference? What are their fees like?
Wrong forum really. For in-depth discussion about P2P go here: http://p2pindependentforum.com/
That’s not “interesting”, that’s literally the point of the new products. Thereseone shared queue between all and you get a 1% bonus and 2% bonus in exchange for the 30d and 90d penalties.
Sadly the consensus is that it’s not longer worth it as it used to be possible to snipe spikes of >4% in the rolling market and now the going rate is glued at 3% as can be seen from ratetrends.
Have been with Zopa since Summer 2017. Their projected return for me is 4.2% - 5.5%. By my own calculations, my actual annualised return has been 3.8% (XIRR function in Excel). Charges a loan sale fee of 1%. So I’m not particularly pleased with Zopa. If I wanted to increase my exposure to Personal loans I’d probably look into Lending Works instead of Zopa.
Have had a non-ISA account with Funding Circle since 2016 (now empty) and an ISA with them since Spring 2018. Their projected return for my ISA is 4.5% - 6.5%. By my own calculations, my actual annualised return has been 5.7% (XIRR function in Excel). Finding Circle charge a 1% loan servicing fee but the projected returns already account for this and there is no additional charge for selling loans. I’ve had good experiences withdrawing money from Funding Circle (instant loan sales) but have not withdrawn anything since early 2018 and have heard withdrawal experience has declied since then with reduced speed and been affected by untradeable loans. So I’m neutral on Funding Circle.
Last period, it took 124 days on average to sell. That’s bad, very bad
Yeah I wouldn’t be putting anything with FC. Assetz are def better.
Such a shame RS have self destructed as badly as Zopa did.
If you still have money in 1yr and 5yr RS markets you can stay there instead of putting money in the new Plus or Max. (Scroll to see them when investing). That way you can still reinvest from say 5yr to 1yr or Access as all the original options are still open to you. Once you have no money in 1yr or 5yr they will be closed to you. That said Max at 5% has pulled 5yr to 5.4%. 1 yr is more variable. I have moved most of my Access to Lending Works and 1yr will follow.