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Post by chielamangus on Jul 31, 2014 14:47:31 GMT
I see that we now have some indication of demand for monthly money - a result I assume of a request on this forum. But where does this demand come from? I tried to get a quote for borrowing for a month, and the option does not exist. The minimum loan period is 6 months. Is the monthly access market purely a residual market operated by RS to meet short term or supplementary loans on top of existing loans? Who is setting the demand interest level? How exactly does it all work? Has anyone here asked the same questions and is there an answer out there somewhere?
On a related note, does anyone have any idea of the current borrowing rates for different term lengths. I tried to find that too but not having a mobile phone I am apparently not worthy of credit!
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spiral
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Post by spiral on Jul 31, 2014 15:49:39 GMT
I believe the 1mth and 1yr market are used to provide longer term variable rate loans but I don't know where I've seen that as I'm neither interested in the lending or borrowing side of that equation so have not explored it in depth.
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markr
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Post by markr on Jul 31, 2014 16:03:12 GMT
If I hadn't been distracted I'd have posted pretty much exactly what spiral said. I'm fairly sure that somewhere I have read that RS offer variable rate loans that are matched against the monthly market each month.
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Post by geoffrey on Aug 1, 2014 7:36:16 GMT
Rehypothecation? Sounds like the demand comes from RS: if capital borrowed on the monthly market it is being re-lent at higher rates for six-month to five-year borrowers, then as and when money is due repayment on the monthly market, it will need to be borrowed again instantly. Presumably offering short terms to lenders provides more liquidity than offering the longer terms only.
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spiral
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Post by spiral on Aug 1, 2014 8:00:14 GMT
then as and when money is due repayment on the monthly market, it will need to be borrowed again instantly. Yes which is why there is a caveat (especially for the 1 yr) along the lines that money may not be repaid at the end of the term if there is insufficient liquidity because your money will be in a loan that doesn't get repaid until after that date. For your money to be repaid, there has to be a greater inflow of funds (repayments and money in queue) on day x than loans being repaid but to date I don't think there's ever been an issue, and it is probably quite unlikely but an obvious scenario where this could occur is if RS started to contract in size.
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oldgrumpy
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Post by oldgrumpy on Aug 1, 2014 8:17:53 GMT
I see that we now have some indication of demand for monthly money - a result I assume of a request on this forum. But where does this demand come from? I tried to get a quote for borrowing for a month, and the option does not exist. The minimum loan period is 6 months. Is the monthly access market purely a residual market operated by RS to meet short term or supplementary loans on top of existing loans? Who is setting the demand interest level? How exactly does it all work? Has anyone here asked the same questions and is there an answer out there somewhere? On a related note, does anyone have any idea of the current borrowing rates for different term lengths. I tried to find that too but not having a mobile phone I am apparently not worthy of credit! Is this where the occasional "surprise" £50K dollops below existing market rate in the 5 year market (discussed in another thread) come from?
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Post by geoffrey on Aug 1, 2014 8:25:07 GMT
Hmmmm. It's also a nice little earner for RS (borrow money at 2.4% and lend it out at 6.3%, pocket the difference). There's something a bit Ponzi-ish about this kind of re-lending (banks do it all the time, of course).
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markr
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Post by markr on Aug 1, 2014 9:21:13 GMT
If you click on the "Lend Money" link in the sidebar, you are taken to a page with some info about the markets. For the monthly market it says you are lending on 6-12 months, and "Your money is lent for one month. At the end of the month, you can roll your contract over or you can withdraw your funds. Borrowers are re-matched in the market with new Lenders each month and enjoy a low-rate loan." There's no mention there or on the 1 year page that you risk not getting repaid at term if there aren't funds available. As an aside, on the 3 year info page it says "You are committing to lend to RateSetter for three years" which is clearly not true, we never lend anything to RS directly. westonkevRS I think this should be changed.
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Post by easteregg on Aug 1, 2014 12:02:45 GMT
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Post by chielamangus on Aug 1, 2014 14:50:17 GMT
Thanks for that. So all the "demand" at rates always below the lowest offer does not come from borrowers but from RS trying to get money cheaper than is currently on offer. It seems we (the lenders) are at a disadvantage against a monopsonist. These rates are not passed on to borrowers because their rates are determined at the commencement of the loan, and it is RS that gains from every point the rate is lowered. Surely the most market neutral way to top up borrowing requirements is to take whatever is needed at the lowest current rate on offer, rather than hang around with a lower offer -rather like spivs at a car-boot sale. If I have got the wrong end of the stick, please let me know. Until then, when I read about the purity of the RS market from the RS rep here, I might be thinking he doth protest too much.
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spiral
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Post by spiral on Aug 3, 2014 10:47:31 GMT
There's no mention there or on the 1 year page that you risk not getting repaid at term if there aren't funds available. I've just looked myself and can't see anything explicit now but I'm sure there used to be. What I did find was "RateSetter applies buffers to manage the smooth running of the exchange and give you reliable access to your money with very prudently matched maturities and constant inflow of funds from borrower repayments and lender reinvestments." www.ratesetter.com/lending/need_to_know.aspxThis is similar to what I said but they've used the term "reliable access". Maybe now they are much more happy/confident that it will never occur.
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ramblin rose
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Post by ramblin rose on Aug 4, 2014 13:26:55 GMT
..................... monopsonist.......................... Ooh, good word - it's a while since I've had the opportunity to learn a brand new word. Thank you.
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Investor
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Post by Investor on Aug 4, 2014 13:58:12 GMT
As a forum whose weltanschauungen is to quomodocunquize, I could not agree more RR. Have always felt a lack of jouissance that we have less of this. Just a shame than my extemporaneousness inhibited me promulgating this earlier. I detest those metathesiophilies and hippopotomonstrosesquippedaliophiles who hold us back from ameliorating on our erudition.
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ramblin rose
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Post by ramblin rose on Aug 4, 2014 14:26:29 GMT
As a forum whose weltanschauungen is to quomodocunquize, I could not agree more RR. Have always felt a lack of jouissance that we have less of this. Just a shame than my extemporaneousness inhibited me promulgating this earlier. I detest those metathesiophilies and hippopotomonstrosesquippedaliophiles who hold us back from ameliorating on our erudition. I wanted to 'double like' that, but clicking the 'thumbs up' twice takes the first like away
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oldgrumpy
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Post by oldgrumpy on Aug 4, 2014 14:30:35 GMT
As a forum whose weltanschauungen is to quomodocunquize, I could not agree more RR. Have always felt a lack of jouissance that we have less of this. Just a shame than my extemporaneousness inhibited me promulgating this earlier. I detest those metathesiophilies and hippopotomonstrosesquippedaliophiles who hold us back from ameliorating on our erudition. Come on, man!!!! Have another sausage! You'll have poor old Dr Johnson sweating in his grave. Respect!!
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