aju
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Post by aju on Oct 13, 2019 9:02:22 GMT
I'm actively managing my lending by defining where I want my money to be lent but people like me are probably not that prevalent or are they.
As access is effectively the old rolling market, how would I get automatically lent into the Plus and Max if I just sat back and did nothing. Does RS move lenders who are set at market rate automatically into P and M relative to 1Y and 5Y returned money.
Am I missing something perhaps but I am curious if this requires active change for lenders to select the new markets then I fail to see how the new markets get populated as surely most lenders are just setting MR and let it roll on by.
I can see that I could redirect payments but if I sat back and did nothing surely i'd be stuck in old markets or is this why RS kept the old Markets as a change would effectively have meant a change in terms and a it would have required a lot of action and decisions on the part of lenders.
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coogaruk
Hello everyone! Anyone remember me?
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Post by coogaruk on Oct 13, 2019 10:33:21 GMT
I can see that I could redirect payments but if I sat back and did nothing surely i'd be stuck in old markets... I'm not sure why you would see this as a bad thing. I have no intention of lending in the 'new' (in my view they are essentially the old but with reduced rates) markets and should my returns fall to the 3/4/5% region then I will begin my rundown. Same will apply should RS decide to ditch the old markets, which I am sure they will in time.
I have watched Zopa and Funding Circle follow the same path and no longer lend (new money) with them either. P2P is not what it once was, nor originally intended to be, aka 'sold as'.
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aju
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Post by aju on Oct 13, 2019 11:15:59 GMT
I can see that I could redirect payments but if I sat back and did nothing surely i'd be stuck in old markets... I'm not sure why you would see this as a bad thing. I have no intention of lending in the 'new' (in my view they are essentially the old but with reduced rates) markets and should my returns fall to the 3/4/5% region then I will begin my rundown. Same will apply should RS decide to ditch the old markets, which I am sure they will in time.
I have watched Zopa and Funding Circle follow the same path and no longer lend (new money) with them either. P2P is not what it once was, nor originally intended to be, aka 'sold as'.
I don't see it as a bad thing, in fact it could be beneficial if it no one is lending in the new Plus/Max then those rates must surely rise up to the old markets rather than what seems to be happening is that rates are dropping. The 1Y is still jumping a bit but my point was that how many people will have changed their settings to point things as the new markets, we are quite a keen bunch on these forums and are what I would call the active people but there must be 1000's of RS investors that just set it up and let it roll on. I'm not lending new money just relending in same markets. I do wait a week or so usually to friday and check where my lending is and where I think the best rates are but I was curious about the majority of lenders are they stuck in old markets until they actively make changes. I'm more active over the weekend but its harder without the queue positioning we had access to and has been removed.
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pomma
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Post by pomma on Oct 13, 2019 11:37:35 GMT
I can see that I could redirect payments but if I sat back and did nothing surely i'd be stuck in old markets... I'm not sure why you would see this as a bad thing. I have no intention of lending in the 'new' (in my view they are essentially the old but with reduced rates) markets and should my returns fall to the 3/4/5% region then I will begin my rundown. Same will apply should RS decide to ditch the old markets, which I am sure they will in time.
I have watched Zopa and Funding Circle follow the same path and no longer lend (new money) with them either. P2P is not what it once was, nor originally intended to be, aka 'sold as'.
Hello coogar and yes I do remember you! Like you I have pulled out of Zopa (when they forced me into the 5 year market) and Funding Circle because of their lack of provision fund. I really don't like the ratesetter changes one bit which also now mean my access funds are going into 5 year loans without my control. I still have access to the 1 year but despite being a very small queue, loans are not getting matched any longer, and I think this market will be time limited. Ratesetter tell me this is because of "the popularity of the new markets" but I suspect it is because priority is being given to the new markets. I want to be proactive with my investments - RS has now taken this away from me so I will move money out too. The only issue is now where to go?? I wonder what lenders' favourites are?
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aju
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Post by aju on Oct 13, 2019 11:57:10 GMT
I'm not sure why you would see this as a bad thing. I have no intention of lending in the 'new' (in my view they are essentially the old but with reduced rates) markets and should my returns fall to the 3/4/5% region then I will begin my rundown. Same will apply should RS decide to ditch the old markets, which I am sure they will in time.
I have watched Zopa and Funding Circle follow the same path and no longer lend (new money) with them either. P2P is not what it once was, nor originally intended to be, aka 'sold as'.
Hello coogar and yes I do remember you! Like you I have pulled out of Zopa (when they forced me into the 5 year market) and Funding Circle because of their lack of provision fund. I really don't like the ratesetter changes one bit which also now mean my access funds are going into 5 year loans without my control. I still have access to the 1 year but despite being a very small queue, loans are not getting matched any longer, and I think this market will be time limited. Ratesetter tell me this is because of "the popularity of the new markets" but I suspect it is because priority is being given to the new markets. I want to be proactive with my investments - RS has now taken this away from me so I will move money out too. The only issue is now where to go?? I wonder what lenders' favourites are? Hi Pomma, surely if you don't want the access/rolling to go to 5y then why not set the highest rate possible and move them where you want. Ok its a bit more hands on but at least you are in control. I'm not fully sure why your access reinvestment is going to 5Y unless that was an old setting perhaps. My Access loans, ex Rolling, seem to be set to relend into access or is it a previously set option that you can no longer turn off. www.ratesetter.com/products/reinvestment-settings-marketindicates that the access rolls into the access product automatically is this not correct?
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pomma
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Post by pomma on Oct 13, 2019 12:20:56 GMT
Thanks Aju..maybe I've misunderstood the changes, that all loan money is now in one lump (hence rates/queue being the same in each of the 3 new products)...and this is what RS said about my query re loan term "With the Rolling market which you previously invested into, loans can be matched up to 5 years." This seems to imply that all 3 new markets can have loans matched across all terms from one combined pool of money?
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aju
Member of DD Central
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Post by aju on Oct 13, 2019 13:55:10 GMT
Thanks Aju..maybe I've misunderstood the changes, that all loan money is now in one lump (hence rates/queue being the same in each of the 3 new products)...and this is what RS said about my query re loan term "With the Rolling market which you previously invested into, loans can be matched up to 5 years." This seems to imply that all 3 new markets can have loans matched across all terms from one combined pool of money? No problems I'm learning too, I see what you mean now but does it really matter if you are in a 5Y loan spread over 60 months or a 1Y spread over 12 months as in Access, and Rolling before, you can pull out as and when you want. Obviously if you cancel any loans in Access, by pulling out early, you will have to wait the the 14 days before you can relend those funds back into the Access product. I'm pretty certain but don't quote me wasn't rolling just a longer loan than a recurring month loan. I'm guessing the down side to a 5Y loan is not the interest, it's the same regardless I think, but the slower return of any capital perhaps but I'd have to check how they really split this up. Mind you I'm just a novice as we all are in this new RS world and I bow down to the more seasoned RS veterans. It's just occurred to me the old Rolling used to seem like it paid back the whole of the loan and then restarted it again so perhaps the Access will be the same but we'll probably need a month to see the true mechanics perhaps. If this stuff is not documented and to be honest the documentation is a bit shambolic in my view (a bunch of faq's where one has to be sure the right questions were asked in the first place.) then it's not surprising people are confused, I know I am most of the time!.
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Post by Deleted on Oct 14, 2019 7:20:48 GMT
I have been attempting to invest in Max at the going rate since about 5th October.
I managed to get some money invested on the 8th. October but this has been repaid with no interest on 14th. October.
Apparently, a portion of this this then set up a loan for slightly less almost straight away. But the rest of the money remained queuing on Max (over 5 days).
At the same time, I have about 70 pounds unaccounted for, and I am trying to work out whether I have missed something or whether there is a mistake in the system itself - somewhere???
Not at all happy with any of this.
Progress on Max product thus far, ZERO and nine days wasted.
I have now cancelled all money queuing to match orders on Max until I sort this out.
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sl75
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Post by sl75 on Oct 15, 2019 8:07:15 GMT
No problems I'm learning too, I see what you mean now but does it really matter if you are in a 5Y loan spread over 60 months or a 1Y spread over 12 months as in Access, and Rolling before, you can pull out as and when you want. The point it matters is if/when you can no longer pull out as and when you want.
Just take a peek over at the discussions about selling loans at Funding Circle - previously one could pull out cash invested in performing loans as and when you wanted there too.
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Post by Deleted on Oct 15, 2019 8:11:10 GMT
The “going rate” is fast becoming pointless on Ratesetter - maybe it is because the “going rate” has been set high to avoid people “fleeing” the platform. Because, as others have pointed out here it is taking up to 100 hours (it could be more) to match any investments at the current “going rate”. I don’t know how long it takes for money to be invested which is 0.1 or 0.2 percent BELOW the “going rate”. But if this continues, there will be the possibility that investments (or re-investments) take an average of 5 days a month to match with orders. Depending on repayment dates, this could result in losing the equivalent of 0.5% interest over a whole year.
In such circumstances, and depending what others are doing, it would be better to invest at 0.1 or 0.2% BELOW “going rate” so that your money is invested in orders faster and earns more than operating at “going rate”.
Basically, the new system is not fit for purpose and is already failing. The “liquidity” that Ratesetter mentions is merely customers money sitting around waiting. Money that will soon disappear once investors realise that the whole product is a dive to “base levels” of return not dissimilar to investing cash elsewhere. All without FSCS protection. Is it really worth risking money when the return is 2.5% (or perhaps soon, less than this)?
Perhaps Ratesetter will address this by describing their “going rate” as 4, 5 and 6% respectively. In which case , your money will take all month to be invested at the “going rate” and you will earn next to nothing.
Or maybe even stories of 6,7 and 8%, will “pull in the stupid punters”.
Of course, charges for withdrawing from “Plus” and “max” are based on “going rate” not on the rate you get when your money is matched to orders.
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sl75
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Post by sl75 on Oct 15, 2019 8:51:44 GMT
The “going rate” is fast becoming pointless on Ratesetter - maybe it is because the “going rate” has been set high to avoid people “fleeing” the platform. Because, as others have pointed out here it is taking up to 100 hours (it could be more) to match any investments at the current “going rate”. I don’t know how long it takes for money to be invested which is 0.1 or 0.2 percent BELOW the “going rate”. But if this continues, there will be the possibility that investments (or re-investments) take an average of 5 days a month to match with orders. Depending on repayment dates, this could result in losing the equivalent of 0.5% interest over a whole year. If investments (or re-investments) take an average of a whole week to be matched, and if the average length of the underlying loan is about 1 year, this means that the money is lent out about 98% of the time, and in the queue about 2% of the time. For a 5.0% interest rate, that'd be equivalent to a 0.1% lower interest rate.
I'm not sure how you did your calculation that resulted in 0.5%... perhaps you mistakenly thought that all money gets re-queued every month (as used to happen in "rolling" under a older system that was phased out many months ago).
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Stonk
Stonking
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Post by Stonk on Oct 15, 2019 8:54:20 GMT
The “going rate” is fast becoming pointless on Ratesetter - maybe it is because the “going rate” has been set high to avoid people “fleeing” the platform. Because, as others have pointed out here it is taking up to 100 hours (it could be more) to match any investments at the current “going rate”. I don’t know how long it takes for money to be invested which is 0.1 or 0.2 percent BELOW the “going rate”. But if this continues, there will be the possibility that investments (or re-investments) take an average of 5 days a month to match with orders. Depending on repayment dates, this could result in losing the equivalent of 0.5% interest over a whole year. In such circumstances, and depending what others are doing, it would be better to invest at 0.1 or 0.2% BELOW “going rate” so that your money is invested in orders faster and earns more than operating at “going rate”. Basically, the new system is not fit for purpose and is already failing. The “liquidity” that Ratesetter mentions is merely customers money sitting around waiting. Money that will soon disappear once investors realise that the whole product is a dive to “base levels” of return not dissimilar to investing cash elsewhere. All without FSCS protection. Is it really worth risking money when the return is 2.5% (or perhaps soon, less than this)? Perhaps Ratesetter will address this by describing their “going rate” as 4, 5 and 6% respectively. In which case , your money will take all month to be invested at the “going rate” and you will earn next to nothing. Or maybe even stories of 6,7 and 8%, will “pull in the stupid punters”.
When the new products were introduced, I think something else crept in which many may not have noticed. It applies to those who lend at RS's suggested rate (i.e., many).
Previously, when you wanted to lend without setting your own rate, RS would suggest a rate that either immediately matched you to a borrower order, or put you at the front of the queue, or at least in a small front 0.1% bracket ahead of the bulk of orders. The suggestion was thus based on the state of the market. If you asked to "lend now", you typically did not find yourself at the back end of a queue of others who had made similar requests for the last N days.
Nowadays, RS's default suggestion is the Going Rate. This is fundamentally different from the old way: it means your order goes at the back of a (currently long) queue. It is also without any consideration of the state of the market. The GR has so far stayed 0.1% above where you need to be to "lend now". That is bad enough, since RS are telling us the money offered at the GR will earn interest "continually", which is plainly incorrect. But actually the GR could be any distance above where the market truly wants to balance.
It's an intractable problem. Neither the old MR nor the new GR can be guaranteed to keep money lent out continually. Indeed, neither methodology can guarantee money will be lent out within any given timescale. I don't like that the New Way ignores the state of the market when suggesting a rate. On the other hand, in certain circumstances the Old Way could lead to silly tem porarily low rates because of constant undercutting.
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Stonk
Stonking
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Post by Stonk on Oct 15, 2019 11:15:26 GMT
The “going rate” is fast becoming pointless on Ratesetter - maybe it is because the “going rate” has been set high to avoid people “fleeing” the platform. Because, as others have pointed out here it is taking up to 100 hours (it could be more) to match any investments at the current “going rate”. I don’t know how long it takes for money to be invested which is 0.1 or 0.2 percent BELOW the “going rate”. But if this continues, there will be the possibility that investments (or re-investments) take an average of 5 days a month to match with orders. Depending on repayment dates, this could result in losing the equivalent of 0.5% interest over a whole year. If investments (or re-investments) take an average of a whole week to be matched, and if the average length of the underlying loan is about 1 year, this means that the money is lent out about 98% of the time, and in the queue about 2% of the time. For a 5.0% interest rate, that'd be equivalent to a 0.1% lower interest rate. I'm not sure how you did your calculation that resulted in 0.5%... perhaps you mistakenly thought that all money gets re-queued every month (as used to happen in "rolling" under a older system that was phased out many months ago).
I humbly beg to differ, and I set my stall somewhere in between! Suppose you intend to invest £1,000 at a notional 5.0%. Assume the queue to invest remains steady at 7 days. Using a time scale of 1 year, we will consider the "loss of interest", by which I mean "interest you would have received on money if it had been invested immediately, but did not receive because the money was queueing".
The first thing that happens is the £1,000 has to queue to be lent, and you lose 7 days interest on £1,000.
Then there are additional interest losses through the year. The notional 5.0% is a compounded rate which is achieved only if incoming cashflows are immediately reinvested at the original rate, and any delay in reinvesting repayments will reduce the actual return. If you bought a loan with a term of 5 years, then here is its repayment schedule in the first year (give or take a few pence depending on how you calculate it): Month | Principal on loan
| Payment
| Principal paid
| Interest paid
| 1
| 1,000.00 | 18.87 | 14.70 | 4.17 | 2 | 985.30 | 18.87 | 14.76 | 4.11 | 3 | 970.54 | 18.87 | 14.83 | 4.04 | 4 | 955.71 | 18.87 | 14.89 | 3.98 | 5 | 940.82 | 18.87 | 14.95 | 3.92 | 6 | 925.87 | 18.87 | 15.01 | 3.86 | 7 | 910.86 | 18.87 | 15.07 | 3.80 | 8 | 895.79 | 18.87 | 15.14 | 3.73 | 9 | 880.65 | 18.87 | 15.20 | 3.67 | 10 | 865.45 | 18.87 | 15.26 | 3.61 | 11 | 850.19 | 18.87 | 15.33 | 3.54 | 12 | 834.86 | 18.87 | 15.39 | 3.48 |
At the beginning of each of months 2 to 12, there will be £18.87 having to queue to be reinvested. Overall, you will lose 7 days of interest on £207.57 (11 lots of £18.87). So, in total during the year you lose 7 days of interest on the original £1,000 and subsequent £207.57 ... which at 5.0% amounts to £1.16. The interest you do receive is £45.91, and the lost interest reduces your return from the notional 5.0% down to about 4.88%. However, the proportion of interest you lose depends on the length of the loan. Or, equivalently, the point in its life at which you enter a loan (i.e., a 5 year loan that has already run 4 years is equivalent to a brand new 1 year loan).
Here is the schedule for a £1,000 loan with a term of 1 year:
Month | Principal on loan
| Payment
| Principal paid
| Interest paid
| 1
| 1,000.00 | 85.61 | 81.44 | 4.17 | 2 | 918.56 | 85.61 | 81.78 | 3.83
| 3 | 836.78 | 85.61 | 82.12 | 3.49 | 4 | 754.66 | 85.61 | 82.47 | 3.14 | 5 | 672.19 | 85.61 | 82.81 | 2.80 | 6 | 589.38 | 85.61 | 83.15 | 2.46 | 7 | 506.23 | 85.61 | 83.50 | 2.11 | 8 | 422.73 | 85.61 | 83.85 | 1.76 | 9 | 338.88 | 85.61 | 84.20 | 1.41 | 10 | 254.68 | 85.61 | 84.55 | 1.06 | 11 | 170.13 | 85.61 | 84.90 | 0.71 | 12 | 85.23 | 85.59 | 85.23 | 0.36 |
Note the differences compared to the 5 year loan: Firstly, the monthly payments are higher, so you will lose interest on larger sums while waiting for them to reinvest. Secondly, the interest you do receive from a 1 year loan is a lot less than you receive during the first year of a 5 year loan, so the interest you lose is a greater proportion of what you receive.
Calculating for this one: in total during the year you lose 7 days of interest on the original £1,000 and subsequent £941.71 (11 lots of £85.61) ... which at 5.0% amounts to £1.86. The interest you do receive is £27.30, and the lost interest reduces your return from the notional 5.0% down to about 4.69%.
Phew!
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sl75
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Post by sl75 on Oct 15, 2019 12:30:41 GMT
Whilst I appreciate the effort that went into this, I think you missed the point somewhat...
For a 5 year amortising loan with no early repayment, your money ends up lent out (and earning interest) for an average of around 2.5 years. Similarly a 3 year loan with no early repayments is earning for 1.5 years. A 1 year non-amortising loan is earning for a full year, etc.
I was keeping the calculations simple by assuming that "the average RS loan" would be earning interest for "about 1 year" giving about a 50:1 ratio for the "proportion of portfolio earning interest" and the "proportion of portfolio waiting to be matched" if we've got "about a week".
For a brand new amount being lent, the up-front "cost" of interest not received for a week is indeed "paid" for the whole amount in the first year, and again for any amounts recycled within the first year, but the benefit when matched to at least some longer-term loans are the amounts that don't need to be rematched in the second and subsequent years. For a 1 year amortising loan (or indeed any loan where money is recycled more quickly than 1 year on average, the figures would be lower, and these shorter-term loans (together with any second hand ones) would certainly bring down the average re-investment time from the approx 2.5 year time average time to re-investment that you have from a portfolio consisting purely of 5 year loans that are not repaid early.
I think you're also double-counting - the "cost" of the non-earning period when the money is relent should be associated with the new loan created at that time rather than the loan that generated the repayment. i.e. the "cost" of re-investing each £18.87 needs to be associated with the £18.87 loan generated as a result, and not with the original £1000 5 year loan. In particular, reconsider what happens to your "5 year" example in year 2. [Similarly you may have forgotten to count the repayments of the re-invested £18.87 units, and the new loans generated as a result of THESE repayments when combined with the next £18.87 main repayment - by the end of the year your re-investment amount will be rather more than £18.87]
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Stonk
Stonking
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Post by Stonk on Oct 15, 2019 13:03:46 GMT
Whilst I appreciate the effort that went into this, I think you missed the point somewhat...
For a 5 year amortising loan with no early repayment, your money ends up lent out (and earning interest) for an average of around 2.5 years. Similarly a 3 year loan with no early repayments is earning for 1.5 years. A 1 year non-amortising loan is earning for a full year, etc.
I was keeping the calculations simple by assuming that "the average RS loan" would be earning interest for "about 1 year" giving about a 50:1 ratio for the "proportion of portfolio earning interest" and the "proportion of portfolio waiting to be matched" if we've got "about a week".
For a brand new amount being lent, the up-front "cost" of interest not received for a week is indeed "paid" for the whole amount in the first year, and again for any amounts recycled within the first year, but the benefit when matched to at least some longer-term loans are the amounts that don't need to be rematched in the second and subsequent years. For a 1 year amortising loan (or indeed any loan where money is recycled more quickly than 1 year on average, the figures would be lower, and these shorter-term loans (together with any second hand ones) would certainly bring down the average re-investment time from the approx 2.5 year time average time to re-investment that you have from a portfolio consisting purely of 5 year loans that are not repaid early.
I think you're also double-counting - the "cost" of the non-earning period when the money is relent should be associated with the new loan created at that time rather than the loan that generated the repayment. i.e. the "cost" of re-investing each £18.87 needs to be associated with the £18.87 loan generated as a result, and not with the original £1000 5 year loan. In particular, reconsider what happens to your "5 year" example in year 2. [Similarly you may have forgotten to count the repayments of the re-invested £18.87 units, and the new loans generated as a result of THESE repayments when combined with the next £18.87 main repayment - by the end of the year your re-investment amount will be rather more than £18.87]
I'm glad it's not as bad as it seemed!
I think you are correct about double-counting. If I associate the lost interest on the initial £1,000 with this loan, then I cannot also include the lost interest on the repayments.
I also realise that holding for longer will dilute the effect of the lost interest on the initial purchase. I was thinking from the perspective of depositing for a year and then cashing out and counting the profit.
As for the child loans, I'm not sure whether or not they need considering, given my approach. They will each be subject individually to the same logic. Here I reach the limitations of my spreadsheet. The children will multiply. I can feel a computer simulation coming on.
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