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Post by sayyestocress on May 3, 2018 8:34:44 GMT
I find it more difficult to understand the new rolling system than the old one, do you think if enough of us tell them that they'll change it back?! I suspect not as to me the explanation read like an excuse for making changes for their own benefit.
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mary
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Post by mary on May 3, 2018 10:47:20 GMT
No, that's not correct - the point of the new RS system is that once you have a lump in the rolling market at a given rate, it will stay at that rate until either you pull out or that loan comes to an end, at which point the reinvestment rules apply. The length of the loan will be random, up to 5 years. But every month there will be a bit of a repayment from the borrower - the RS loans are not bullet loans, they pay back interest and and a portion of the capital every month. Every month on the 5 year market you get a bit of capital back plus a bit of interest. They are doing the same on the rolling market. "As capital and interest is repaid by borrowers, it is returned to investors in monthly instalments for the duration of the investment. These repayments will be automatically reinvested back into the Rolling market at the prevailing Market Rate. As the overwhelming majority (up to 93%) of our investors currently reinvest at the Market Rate, a proportion that continues to rise over time, we have decided to withdraw the option of selecting a bespoke rate for reinvested money in the Rolling market." It is also worth remembering that many loans are paid back early by borrowers either in part or full. These repayments will go back onto the market at the market rate that day I assume. This is how Market Rate is currently calculated...from RS Q&A...
How it works: The Market Rate is automatically calculated in each market every day. The rate is set by taking a weighted average of all the rates transacted during the previous day between 6am and 10pm.
Except that in the new system the rate will stay the same forever (as all matches the prior day are forcible at the same rate set by RS) until RS decide to change the rate. So, rather than a marketplace dictated by supply and demand, RS simply set a rate (which I am going to guess will be 2.5%) and keep it the same, until there is a chance that lender supply is too low (it certainly is not at present) and then they will raise the rate a tad.
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Post by davee39 on May 3, 2018 11:11:45 GMT
First, a clarification, The Market Rate will be set by new money - not including funds already invested at the Market Rate. In practice since all the demand is from RS, and more of it will in in practice be set at market rate, there is little chance that the new money will actually be invested at a significantly higher rate.
Secondly, a justification, yes it is perfectly possible for lenders to cash in rolling funds at a low rate to re-invest when the market is higher - so this would incur some cost to RS
Thirdly an observation, RS is not doing as well as expected. The model of churning monthly loans against 5 year debt is unique to RS and not without risk. The provision fund is underfunded. Defaults have been higher than expected. 5 yr rates are too low since the provision fund is unlikely to emerge unscathed from the next recession. I am withdrawing funds as they mature.
Finally, a destination. FSCS protected savings accounts at 1.2% instant to 1.7% (1 year Ford Money), and a mix of high interest bond and equity funds.
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cb25
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Post by cb25 on May 3, 2018 13:03:26 GMT
Finally, a destination. FSCS protected savings accounts .. and a mix of high interest bond and equity funds. Some might say the price of bonds have been driven up (and yields down) due to low central bank base rates and they're going to snap in the other direction if/when base rates begin to normalize. (I've no money in bonds so don't really care)
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jlend
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Post by jlend on May 4, 2018 8:49:30 GMT
A query for someone who currently uses the market rate on the rolling market.
If your money doesnt match immediately, can you go in and change the rate either up or down of the unlent money on the market?
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ceejay
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Post by ceejay on May 4, 2018 8:59:37 GMT
A query for someone who currently uses the market rate on the rolling market. If your money doesnt match immediately, can you go in and change the rate either up or down of the unlent money on the market? Yes, you can.
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sl75
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Post by sl75 on May 4, 2018 13:19:08 GMT
I don't understand how forcing almost everyone to use the same rate would decrease volatility - at least on first analysis, if anything, it would seem to me more likely to INCREASE volatility.
Currently, when the funds at "market rate" are exhausted, there's likely to be plenty on offer at "market rate +0.1" and "market rate +0.2%", etc. which would avoid the rates rising by very much.
If almost everyone is lending at "market rate", then when the "market rate" funds are exhausted, there would be fewer offers on the market at "market rate +0.1", etc., so any unmatched amount could cause rates to rise by much more.
However, that assumes people who set a rate are setting rates at or above market rates... perhaps there are in fact a significant minority of investors who currently have re-investment rates set BELOW the market rate (having chosen that rate only because RateSetter told them it was the best rate to use "right now"), and it is these investors whose offers are contributing to the volatility that RateSetter claim this change would fix?
If so, the best thing that RateSetter could do to avoid fueling the volatility would be to get rid of the nonsense involving the rate to lend "right now" that attempts to push investors to rates substantially BELOW the "market rate". e.g. they could disallow offers at rates that undercut the market rate by more than (say) 0.2%, unless you confirm you're a "RateSetter expert" of course.
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jlend
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Post by jlend on May 4, 2018 14:31:46 GMT
Presumably you'll be able to divert Rolling money to the holding account for later reinvesment at whatever rate you choose? I appreciate that'll involve more manual work but hey isn't that exactly what 'hands-on' investors do already in order to maximise their returns? That sounds like it should work in theory. Unfortunately it won't really work for me. I run an account for my Mum where (on her behalf) I reinvest capital only. Interest is accumulated in the holding account and paid out automatically once a month. If I were to switch to sending everything to the holding account it would be incredibly hard work separating out and reinvesting the capital every day. From today she and I will no longer be using the rolling market. You will continue to be able to divert the interest to the holding account as you do now after i checked with RS. It appears you wont be able to divert the monthly capital repayments from borrowers. Any capital repayments made by borrowers will go back on the market at the market rate. So you could continue if you were happy to use the market rate to re invest any capital repayments.
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Post by investor1925 on May 4, 2018 15:29:32 GMT
Sadly it looks as if I'll be leaving. Hopefully, If enough of us leave, the "market rate" will rise sufficiently to tempt us back. This isn't going to happen when there is over £12million sitting there waiting to be invested Until then, I'm just going to park it in AC at their default rate of 3.75%
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cb25
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Post by cb25 on May 4, 2018 16:22:52 GMT
Sadly it looks as if I'll be leaving. Hopefully, If enough of us leave, the "market rate" will rise sufficiently to tempt us back. This isn't going to happen when there is over £12million sitting there waiting to be invested Until then, I'm just going to park it in AC at their default rate of 3.75% Can always use AC's 30 day account (currently 4.25%, as I'm sure you know) as a 'rolling' account, i.e. put money into it, then immediately give 30 days notice.
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pikestaff
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Post by pikestaff on May 4, 2018 16:45:21 GMT
...So you could continue if you were happy to use the market rate to re invest any capital repayments. Which I'm not, which is why I and my Mum will no longer be using the rolling market, except as noted below. Most of our RS money was in the 5 year market anyway and will stay there. It would appear from RS's announcement that the "fair usage policy" will NOT charge lenders for cashing out of the rolling market and immediately reinvesting in the 5 year market. If this is confirmed when the updated T&Cs are published, I expect us to continue to use the rolling market as a temporary home when 5 year rates are too low. For (unguaranteed) liquidity I will be using AC instead of RS. Not really practical for my Mum though, as she does not do electronic banking and AC don't take payments by debit card.
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TheDriver
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Slightly bonkers
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Post by TheDriver on May 4, 2018 19:15:53 GMT
But every month there will be a bit of a repayment from the borrower - the RS loans are not bullet loans, they pay back interest and and a portion of the capital every month. Every month on the 5 year market you get a bit of capital back plus a bit of interest. They are doing the same on the rolling market. "As capital and interest is repaid by borrowers, it is returned to investors in monthly instalments for the duration of the investment. These repayments will be automatically reinvested back into the Rolling market at the prevailing Market Rate. As the overwhelming majority (up to 93%) of our investors currently reinvest at the Market Rate, a proportion that continues to rise over time, we have decided to withdraw the option of selecting a bespoke rate for reinvested money in the Rolling market." It is also worth remembering that many loans are paid back early by borrowers either in part or full. These repayments will go back onto the market at the market rate that day I assume. This is how Market Rate is currently calculated...from RS Q&A...
How it works: The Market Rate is automatically calculated in each market every day. The rate is set by taking a weighted average of all the rates transacted during the previous day between 6am and 10pm.
Except that in the new system the rate will stay the same forever (as all matches the prior day are forcible at the same rate set by RS) until RS decide to change the rate. So, rather than a marketplace dictated by supply and demand, RS simply set a rate (which I am going to guess will be 2.5%) and keep it the same, until there is a chance that lender supply is too low (it certainly is not at present) and then they will raise the rate a tad.
I've long wondered where to find this mysterious Market Rate. I would have expected it to be the rate shown on the "Lend Money" page under the heading "What are the Rates?", but the figures there vary during the day! While there is excess money in the system, the only way the Market Rate will go is down, if some lenders undercut the set rate to avoid the lending queue, but if that queue ever disappears it would appear the rate will spike dramatically as there will be very little other funding in the system!
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sussexlender
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Post by sussexlender on May 7, 2018 20:09:40 GMT
One solution to this decision by Ratesetters to remove the ability of customer / investors to "set the rate"?
Divert all sums becoming due by way of capital and interest on this months Rolling Market to your Holding account, thus reducing the amount available to RS to lend. If enough of us did this it might just start to make rates increase.
If rates continue to decline cash can be removed without any delay from Holding.
I have no intention of lending cash under the heading of a Rolling market only to find I am in fact locked in to a 5 year loan without being told.
Absurd business decision by RS and takes away their unique selling point which brought me to their p2p site in the first place.
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amphoria
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Post by amphoria on May 7, 2018 21:42:07 GMT
One solution to this decision by Ratesetters to remove the ability of customer / investors to "set the rate"?
Divert all sums becoming due by way of capital and interest on this months Rolling Market to your Holding account, thus reducing the amount available to RS to lend. If enough of us did this it might just start to make rates increase.
If rates continue to decline cash can be removed without any delay from Holding.
I have no intention of lending cash under the heading of a Rolling market only to find I am in fact locked in to a 5 year loan without being told.
Absurd business decision by RS and takes away their unique selling point which brought me to their p2p site in the first place. According to the post from jlend above you won't be able to divert repaid capital to the holding account, only interest. This effectively means that all capital invested in rolling from tomorrow will be automatically re-invested at market rate as the repayments will be after 6th June.
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Post by stevexxx on May 7, 2018 22:27:33 GMT
I dont care how they run it as long as I can get around 5% on the 5 year rate, at the moment its 5.3%. If the rate around 5% then I will continue to invest, if not auto-invest will be turned off and the money filtered out to elswhere..
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