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Post by reeknralf on Jan 5, 2015 18:31:38 GMT
So I've only just joined ratesetter as they won't accept ex-pats. Glancing through the threads everything seems focused on the 5 year rates. Yet IMO, the 5 year is the least attractive. I can see the advantage of ratesetter as a building society substitute to park short-term money, but there are many much better offers available for longer term investments.
I see you can pull you're money out early for a fee, but this is contingent on them finding a buyer for your loan. Once saving rates go up, presumably this year, no-one's going to want a 5 year loan at a cheap rate, so you're effectively locked in if you hold on too long.
I've emailed and asked for the early sale fees (no reply so far), but suspect several thousand parked in the 5 year option for 3 months would beat the 1 month option, even allowing for the fees. is this what people are doing, or am I missing something?
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sl75
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Post by sl75 on Jan 5, 2015 18:50:28 GMT
So I've only just joined ratesetter as they won't accept ex-pats. Glancing through the threads everything seems focused on the 5 year rates. Yet IMO, the 5 year is the least attractive. I can see the advantage of ratesetter as a building society substitute to park short-term money, but there are many much better offers available for longer term investments. I see you can pull you're money out early for a fee, but this is contingent on them finding a buyer for your loan. Once saving rates go up, presumably this year, no-one's going to want a 5 year loan at a cheap rate, so you're effectively locked in if you hold on too long. I've emailed and asked for the early sale fees (no reply so far), but suspect several thousand parked in the 5 year option for 3 months would beat the 1 month option, even allowing for the fees. is this what people are doing, or am I missing something? You appear to be missing how RateSetter's fees are calculated. If you park several thousand in the 5 year option for 3 months, the system will calculate a fee that is sufficient to reduce your return to what you would have got investing in the 1 month option for those 3 months. Once you get towards the end of a 3 or 5 year option, they go even further - clawing back income that accrued on capital that was repaid long ago [e.g. if you have £100 remaining of an investment that was originally £5000, they'll claw back income from the entire £5000 investment, rather than only on the £100 you're selling out], so that you'd be better off borrowing from a payday lender (and rolling the balance over a couple of times) rather than using the sellout option. RateSetter have yet to be convinced this constitutes an excessive fee.
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mikeb
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Post by mikeb on Jan 5, 2015 18:54:47 GMT
Once saving rates go up, presumably this year, Base rates, and the savings rates, have been "about to go up" for a while now. It hasn't happened. Maybe tomorrow, along with the jam that I'm waiting for? Even if the base rate rises, who's to say that savings rates will rise? After all, banks and building societies don't want your money. They can still get the Fumbling For Lending money off the government on the cheap. Some of them are currently still CUTTING their rates. When rates start rising, maybe people will re-evaluate. Meanwhile, 5 year market it is!
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Post by goldservice on Jan 5, 2015 19:01:41 GMT
... I can see the advantage of ratesetter as a building society substitute to park short-term money, but there are many much better offers available for longer term investments. ... Could you please give some details on those better offers?
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Post by moneyball on Jan 6, 2015 10:16:11 GMT
So I've only just joined ratesetter as they won't accept ex-pats. Glancing through the threads everything seems focused on the 5 year rates. Yet IMO, the 5 year is the least attractive. I can see the advantage of ratesetter as a building society substitute to park short-term money, but there are many much better offers available for longer term investments. I see you can pull you're money out early for a fee, but this is contingent on them finding a buyer for your loan. Once saving rates go up, presumably this year, no-one's going to want a 5 year loan at a cheap rate, so you're effectively locked in if you hold on too long. I've emailed and asked for the early sale fees (no reply so far), but suspect several thousand parked in the 5 year option for 3 months would beat the 1 month option, even allowing for the fees. is this what people are doing, or am I missing something? Remember that your loan is amortizing, so capital is regularly coming back throughout which can be deployed elsewhere (in and out of RateSetter) if your views/priorities change. In my view, this a big benefit compared to tying up all your money for an entire 5 years. I do have some curiosity just why demand for loans over 5 years appears to be so much stronger then compared to 3 and 4 years. Whatever the reasons, they will partly explain the focus on 5yr market on the forums. As for better investment alternatives over that time frame, I too am all ears. I know of quite a few myself but the ones I've found and/or involved in have different dynamics, risks, requirements etc.
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Post by reeknralf on Jan 6, 2015 17:35:45 GMT
Ratesetter replied explaining precisely nothing about the sell-out fees. So thanks for letting me know they're expensive. I did a simulation on the web-site and it seemed to charge a flat fee of £10. Now I know this is not representative.
I used the word 'better' ill-advisedly. A diversified asset-backed loan portfolio gives you ~9-10% net of 'routine' defaults, i.e. defaults due to individual problems unique to the borrowers. In the case of widespread defaults, e.g. due to an economic downturn, I'd trust asset backing at least as much as a provision fund. I could, of course, be wrong.
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Post by goldservice on Jan 6, 2015 19:40:03 GMT
Thank you for the clarification that you were referring to asset-backed loans - but I should still be grateful to know of some examples. The other P2B sites might fit your description except that forum comment suggests that diversification is difficult to achieve on those sites so any examples of what you mean would be gratefully received.
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