dorset
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Post by dorset on Dec 12, 2017 10:17:28 GMT
Just had 18 separate notifications of "investment completed early" and several £thousand back into my holding account . This is about 15% of my total RS investment. A lot of these are 6%+ loans. Am I being dumped so RS can refinance at a lower rate and pocket the difference?
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mary
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Post by mary on Dec 12, 2017 11:15:48 GMT
Just had 18 separate notifications of "investment completed early" and several £thousand back into my holding account . This is about 15% of my total RS investment. A lot of these are 6%+ loans. Am I being dumped so RS can refinance at a lower rate and pocket the difference? This is the only logical explanation. Happened to me last week, everyone of my 6%+ repaid after a few weeks. Also happened back in March when I got 25% of my higher rate loans repaid within a week when the new rates on offer were much lower, so I moved the money elsewhere.
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puddleduck
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Post by puddleduck on Dec 12, 2017 11:38:30 GMT
Same here, I am finding almost everything going for circa 6.0% in the 1 year rate is repaying early within around 3 months.
It's clear that the 'borrower' is Ratesetter who is paying us back with cheaper money they've brought in via other lenders.
Actually I feel there are some transparency issues with this.
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Post by skint4achange on Dec 12, 2017 12:14:20 GMT
westonkevRS, do you care to shed some light on this matter as a representative of Ratesetter?
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Post by GSV3MIaC on Dec 12, 2017 12:18:12 GMT
westonkevRS , do you care to shed some light on this matter as a representative of Ratesetter? He isn't, any longer, a representative of RS .. you'd do better to email or call their customer support folks.
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dorset
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Post by dorset on Dec 12, 2017 12:30:23 GMT
Yes all of my 6%+ loans were less than 3 months old.
So lets run through the rules. If interest rates rise then its your problem and you are locked in for the five years but if interest rates fall then although you have a "notional" five year deal its still your problem and you are repaid and have to reinvest at the lower rate or take out your money.
Its all a bit grubby RS. This is typical mainstream banking - I thought that the new dawn of p2p was going to be different?
Have withdrawn my few thousand from holding account. The difference now is that when rates rise to 6% I will save my time and effort and stay away.
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Post by Deleted on Dec 12, 2017 12:43:41 GMT
So lets run through the rules. If interest rates rise then its your problem and you are locked in for the five years but if interest rates fall then although you have a "notional" five year deal its still your problem and you are repaid and have to reinvest at the lower rate or take out your money. Thats how lending to consumers works. They have the right to repay early by law, and guess what? They will always repay the most expensive loans first. And if rates fall, they are likely to refinance at lower rates. No idea why this comes as such a shock to people. Its a fundamental part of consumer loans.
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Post by skint4achange on Dec 12, 2017 12:47:12 GMT
As this hasn't happened to me (YET!) as I am fairly new to RS (May happen to me next month though) I do not feel it is my place to contact them as they will just think I have lost the plot somewhere along the line.
However, if someone does contact them and there is no answer to this, I will contact them and withdraw all funds that I can.
As dorset said, might as well go elsewhere even with 6% on offer as to keep it at that rate will take a lot of time and effort. Can get 6% elsewhere with much less effort.
I do also think this may become a bigger problem in February when their IFISA comes online.
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Post by Deleted on Dec 12, 2017 12:53:23 GMT
Honestly, if you have a problem with the duration of these loans shortening as rates fall, then yes, you are better off investing in other products.
This phenomenon is very well understood in finance for these types of loans where borrowers have the right by law to repay early.
Google 'negative convexity'.
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puddleduck
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Post by puddleduck on Dec 12, 2017 12:58:01 GMT
So lets run through the rules. If interest rates rise then its your problem and you are locked in for the five years but if interest rates fall then although you have a "notional" five year deal its still your problem and you are repaid and have to reinvest at the lower rate or take out your money. Thats how lending to consumers works. They have the right to repay early by law, and guess what? They will always repay the most expensive loans first. And if rates fall, they are likely to refinance at lower rates. No idea why this comes as such a shock to people. Its a fundamental part of consumer loans. The problem is, I don't think the borrower in the case of these multiple payments is a Consumer (ie a non business entity) It is VERY unlikely a consumer would be paying 18 or 20 loans over multiple contracts simultaneously. I am sure we all know how lending to consumers works - but I think the repayments are too coincidental to be Joe Bloggs paying for his GiffGaff mobile contract! If it looks like a duck, it probably is a duck. It's Ratesetter paying us back, not Mr Bloggs is the gist.
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Post by Deleted on Dec 12, 2017 13:01:41 GMT
The principle applies to any lending with a right to repay early. Consumers just have stronger rights enshrined in law.
But hey, if you have any actual proof that its a grand conspiracy, I'd love to hear it.
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puddleduck
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Post by puddleduck on Dec 12, 2017 13:07:34 GMT
The principle applies to any lending with a right to repay early. Consumers just have stronger rights enshrined in law. But hey, if you have any actual proof that its a grand conspiracy, I'd love to hear it. Obviously with Ratesetter's notoriously opaque transparency, then if you want proof, then no one can give it (either way) - we can just report what we see. Let me put it to you another way - several 100k have just re-paid back over multiple loan contracts. Who do you think is most likely to be the borrower? Ratesetter themselves, or a bunch of "consumers" who found several hundred K behind the back of the sofa?
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dorset
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Post by dorset on Dec 12, 2017 13:09:15 GMT
Honestly, if you have a problem with the duration of these loans shortening as rates fall, then yes, you are better off investing in other products. This phenomenon is very well understood in finance for these types of loans where borrowers have the right by law to repay early. Google 'negative convexity'. Sorry but you are missing the point. The borrower is NOT repaying early. The borrowing is still in place. What RS are doing are refinancing the funding for the loan and keeping the extra margin to themselves. RS is not the borrower. RS are of course entitled to do this but it is sharp practice whichever way you look at it. I appreciate that RS needs to rebuild its balance sheet after its naive wholesale lending decisions in 2015/16 but surely not this way?
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Post by Deleted on Dec 12, 2017 13:10:50 GMT
Let me put it to you another way - several 100k have just re-paid back over multiple loan contracts. Who do you think is most likely to be the borrower? Ratesetter themselves, or a bunch of "consumers" who found several hundred K behind the back of the sofa? And let me repeat my answer. The principle applies to any lending with a right to repay early.RateSetter have non-consumer loans too. With... wait for it... surprise, surprise... the right to repay early.
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Post by Deleted on Dec 12, 2017 13:14:15 GMT
Sorry but you are missing the point. The borrower is NOT repaying early. The borrowing is still in place. What RS are doing are refinancing the funding for the loan and keeping the extra margin to themselves. RS is not the borrower. Proof??? Or just conjecture. Either way, its negative convexity. Its what you get in this type of lending. If you've just figured this out, and it angers you so much, then yes, it sounds like you are in the wrong kind of lending.
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