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Post by geoffrey on Aug 30, 2014 18:11:27 GMT
The "controversy" was started when it was pointed out that for borrowers there is no option to borrow for a month. RS has not clarified how this is actually working: the monthly loans from lenders seem to be financing loans to borrowers of a longer duration, which begs the question of how the loan is refinanced after a month and whether the demand is synthetic. The answer may be obvious, but RS could do a better job of explaining.
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Post by chielamangus on Sept 2, 2014 12:08:18 GMT
To sI75
"Despite your assertions, as far as we know, RS don't set these rates" I think you mean "as far as I know", Please don't include me in your ignorance.
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sl75
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Post by sl75 on Sept 2, 2014 13:48:46 GMT
The "controversy" was started when it was pointed out that for borrowers there is no option to borrow for a month. RS has not clarified how this is actually working: the monthly loans from lenders seem to be financing loans to borrowers of a longer duration, which begs the question of how the loan is refinanced after a month and whether the demand is synthetic. The answer may be obvious, but RS could do a better job of explaining. The obvious answer would be that the remaining balance is refinanced at whatever the prevailing market rate for 1 month money is at that time. The borrower is sold a "variable rate" loan, and unless they take any action to the contrary, the residual balance of their loan forms part of the demand next month, and the lender is sold a 1 month contract at a fixed rate. Market forces can still operate because: - new borrowers seeking loans up to 24 months will base their decision on the then-current rates for short-term funds. - existing borrowers can choose to settle their loans without penalty at any time, and if the rates move against them, some borrowers will choose to do so - whether by refinancing onto a fixed rate within RateSetter, or sourcing funds from elsewhere. - lenders can offer their funds at whatever minimum rate they choose - those lenders who choose to allow themselves to be matched at or below the "current market rate" will do so. If chielamangus has any evidence to suggest that RS operate their market in any manner other than as described (e.g. to back up the accusations of RS having a direct influence over rates), I'm sure we'd all be interested to hear it. Otherwise I see no reason to assume anything other than that the market behaves exactly as RS describe it - with the rates set solely by the participants in the market place, and RS's own influence being solely down to how hard they advertise for new borrowers vs new lenders, what fees they set (occupying the spread between lender return and borrower APR), and how many loans they approve (thereby allowing the borrowers to form part of the demand at up to whatever APR those borrowers find acceptable). However, if some of you haven't properly understood how the observed behaviour is fully consistent with RS not setting the rates themselves, please don't include me in your ignorance either....
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Post by geoffrey on Sept 2, 2014 14:46:51 GMT
The borrower is sold a "variable rate" loan, and unless they take any action to the contrary, the residual balance of their loan forms part of the demand next month, and the lender is sold a 1 month contract at a fixed rate. Thanks for the explanation as to a possible mechanism (obvious or not, I've no idea why RS couldn't themselves have given a clear statement). So I suppose this market operates an automatic matching algorithm to refinance the longer-term loans each month, as opposed to the longer-term fixed-rate markets where borrowers have a choice as to whether to accept the available rates that day or not (within a 14-day window).
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Post by wibble on Sept 12, 2014 14:55:20 GMT
Those monthly loans which aren't .... Another 5 monthly contracts overnight and none of them for a month! All a couple of days under. RS obviously needs the money on Sept 16th rather than Sept 18, and I am apparently powerless to enforce the agreement for a monthly loan. Any answers yet, Kev? Although I don't participate in the monthly markets, it seems obvious to me that these are rematched loans which have a monthly payment on the 16th of each month. As the 16th was on a weekend this month, the payment due date would have been delayed until the next working day (i.e. today, the 18th), but the next payment still remains due on the 16th (at which point the borrower should make a payment covering the interest and capital due, and the remaining capital, if any, would be rematched against the monthly market. On a Monday morning repayment run, it would seem likely that a "luck of the draw" element would be expected to an extent - i.e. whether you get matched at a point when the system is processing repayments that were due on the Saturday (with next payment due 2 days before a full month), the Sunday (with next payment due 1 day before a full month) or the Monday (with next payment due in exactly a month). Conversely, at times when a borrower's next payment would otherwise be due to occur on a weekend, lenders would get matched for up to a couple of days longer than "exactly 1 month" (in particular, I'd suppose that the loans you got matched to today would have lasted from 16 July to 18 Aug for the lenders to whom those borrowers had previously been matched). As well as the weekend effect, most loan providers allow borrowers to pick their repayment day. Assuming RS follow this practice, this would necessarily result in a period between two due payments that is not exactly a month - possibly a little more than a month, and possibly a little less. The lender(s) who are matched to such a loan would then experience a "monthly" loan that is also not exactly a month. In addition, borrowers are also free to make extra payments or settle their outstanding balance in full at any time, which also results in funds being returned to the lenders who supplied it. The direct cause of these effects seems to me as RS having a 1:1 matching between borrowers and lenders in the monthly market (and borrowers necessarily have some variation in what "a month" means, due to weekend effects and the ability to choose a repayment day). Did we ever get an explanation from Ratesetter? I had a monthly loan match yesterday (the 11th) that will not mature until the 20th next month. That seems quite far out of the expected range of "luck of the draw" weekend movements.
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Post by chielamangus on Sept 12, 2014 16:59:06 GMT
I doubt if you will get a satisfactory reply. I was contacted privately by Westonkev who asked for details of these unmonthly loans. I replied, and waited. And waited. And am still waiting. I have taken it up (with another issue) directly with RS officially, and still have no satisfactory answer. I will probably have to vote with my money on this one and drop a note to the Regulator as I leave.
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pikestaff
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Post by pikestaff on Sept 13, 2014 7:24:48 GMT
Did we ever get an explanation from Ratesetter? I had a monthly loan match yesterday (the 11th) that will not mature until the 20th next month. That seems quite far out of the expected range of "luck of the draw" weekend movements. But well within the range for borrowers choosing their repayment day.
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Post by westonkevRS on Sept 26, 2014 21:23:52 GMT
I understand from Customer Services that chielamangus settings have been reviewed; and they've reached out personally to him last month with a comprehensive answer.
The maximum number of days for a rolling contract is set at 35 days. This is because a 30 day payment could result in a end date on a bank holiday (e.g. Thursday of Easter weekend) so a 30 day contract in this case would be extended to the following Tuesday as that is when the borrower payment will happen. We also do not want to end up with very short rolls (between the lender end date and the next borrower payment date).
There was an issue with a very small segment of loans when we were pre-setting the DD date, on a small number of occasions this resulted in contracts longer than the maximum. This issue has been corrected, I'm unsure if this was known or came to light thanks to chielamangus. Either way, thank you and apologies. No lender who required there money in this period was impacted; perhaps RateSetter got lucky.
So to be clear, apart from a small number of contracts created in the last month (most of which have been fixed), the maximum duration has always been 35 days, which will happen on a small percentage of contracts in the monthly rolling.
Kevin.
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Post by wibble on Oct 7, 2014 11:21:40 GMT
Thanks for the explanation - didn't impact me fortunately (could have, though...!), but I did need to make sure our cash flow is within expected bounds.
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duck
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Post by duck on Nov 15, 2014 5:39:43 GMT
Apart from my personal investment I use the monthly market for some of my business cash that I do not want to tie up for longer. +£5k due to be reinvested (I do all reinvestments manually) and as usual the cash was split up unto several packets....... most running for the month (all but one running until 16/12) but one hits my shortest 'loan' so far in this market ............. 10 days and the return is 'Impressive'
C253677? 14/11/2014 £10. 08 2.6% 24/11/2014 £10. 08 View
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sl75
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Post by sl75 on Nov 15, 2014 9:41:53 GMT
Apart from my personal investment I use the monthly market for some of my business cash that I do not want to tie up for longer. +£5k due to be reinvested (I do all reinvestments manually) and as usual the cash was split up unto several packets....... most running for the month (all but one running until 16/12) but one hits my shortest 'loan' so far in this market ............. 10 days and the return is 'Impressive'
C253677? 14/11/2014 £10. 08 2.6% 24/11/2014 £10. 08 View
By my calculations, you should be expecting about £0.007 of interest - I forget how RS handles such fractions?
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Post by westonkevRS on Nov 15, 2014 10:11:21 GMT
I'll find out Monday, just because it is important to know the detail..... Despite the small values discussed they could add up.
P.S. For those of an accounting bias, I believe RateSetters have been submitted to Companies House. Although a full set have been completed and audited internally, I think under submission rules due to our historic company size only exempt summarised versions have been submitted. I mention this because company strength is an important reassurance to lenders, possibly in my opinion of RateSetter (considering the size of the Provision Fund and book risk quality) a more important consideration. And we continue to be profitable and in a strong capital position.
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duck
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Post by duck on Nov 15, 2014 11:06:56 GMT
Apart from my personal investment I use the monthly market for some of my business cash that I do not want to tie up for longer. +£5k due to be reinvested (I do all reinvestments manually) and as usual the cash was split up unto several packets....... most running for the month (all but one running until 16/12) but one hits my shortest 'loan' so far in this market ............. 10 days and the return is 'Impressive'
C253677? 14/11/2014 £10. 08 2.6% 24/11/2014 £10. 08 View
By my calculations, you should be expecting about £0.007 of interest - I forget how RS handles such fractions? Yes I 'calculated' a similar figure and lets face it I'm not going to loose any sleep over it! In fact I'm not loosing any sleep over the 10 day period either .....
Unfortunately I'm an engineer so I do love 'numbers detail', it comes with the territory.
Well thank you westonkev, if you find the accounts don't balance next year you will know where to start looking
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Post by westonkevRS on Nov 15, 2014 13:21:05 GMT
Rhydian "Gus Gorman" Lewis, the salami slicer....
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Post by beegee on Nov 19, 2014 15:50:08 GMT
Had a £1000 loan matched today at 2.5% in one month market. Matures nest Wednesday - 7 days!!
19/11/2014 £1,000. 00 2.5% 26/11/2014 £1,000. 48 View
New definition of One Month needed I think.
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