NSFW
Posts: 118 
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Post by NSFW on Nov 10, 2017 7:27:50 GMT
5 year rate is going down from 5.5% to 5.3%. Seems a bit odd.
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morris
Member of DD Central
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Post by morris on Nov 10, 2017 7:47:18 GMT
I noticed that investments are taking a little longer to shift. Yet they are still offering refer a friend bonuses.
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Post by Matthew on Nov 10, 2017 10:00:45 GMT
Morning morris and NSFWIt's a very interesting discussion, and one we've also had internally many times. Some key points to note are: - Our lender rates are only very indirectly linked to the BoE base rate; the main factor driving our rates is the balance (or imbalance as the case may be) of lender supply and borrower demand on our platform. For example, during ISA season it is reasonable to expect that lender rates may fall slightly as incoming lending capital exceeds the demand for new loans, and this would be irrespective, to a large extent, of external bank rates
- One of the biggest factors in our rate setting relates to the market rates for loans in our key origination channels - as yet, we haven't seen any material movement by the main players in terms of the BoE rate increase being passed on through higher costs of borrowing - we're still in an extremely low APR environment for unsecured personal loans. We therefore have little room to manoeuvre to remain competitive at the prime end of the spectrum. Going forward, if the cost of borrowing starts returning to more recent norms, then this would be more likely to have a positive impact (for you) on lender returns
- Our refer a friend (RAF) programme has run pretty much constantly for the last few years as we see it as a good way to reward lenders for spreading the word about our platform. In practice though, referred friends do not make up a significant part of our supply of new capital, so removing it instead of reducing rates would not have the same balancing effect. It might also be very confusing for lenders if they are never sure whether the RAF bonus is on or off
Hope this helps.
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toast
Member of DD Central
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Post by toast on Nov 10, 2017 20:58:33 GMT
For example, during ISA season it is reasonable to expect that lender rates may fall slightly as incoming lending capital exceeds the demand for new loans, and this would be irrespective, to a large extent, of external bank rates. Does abundance/scarcity of lender funds affect the rates presented to borrowers or does it just mean that more/fewer loans can be satisfied?
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Post by Matthew on Nov 14, 2017 13:44:28 GMT
For example, during ISA season it is reasonable to expect that lender rates may fall slightly as incoming lending capital exceeds the demand for new loans, and this would be irrespective, to a large extent, of external bank rates. Does abundance/scarcity of lender funds affect the rates presented to borrowers or does it just mean that more/fewer loans can be satisfied? Hi toastApologies for the slow reply... In short, while the lender and borrower rates operate independently from one another, when we reduce lender rates (for example in order to help slow down the flow of new capital into the platform) we generally try to pass the reduction on through cheaper loan rates in order to increase loan volume and attract the highest quality (lowest risk) borrowers. However, since we operate across multiple channels, within which exist multiple sources of loans, a blanket borrower rate change doesn't really apply. We'll typically pass through rate reductions first in our most price-sensitive channels e.g. aggregator sites like GoCompare or MSM. In practice, the rates payable by borrowers are changing fluidly across all channels and sources, dependent on a number of factors including but not limited to market pricing, our cost of funds and achieving acceptable profit margins. Hope this helps.
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