warn
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Curmudgeon
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Post by warn on Jun 14, 2015 9:11:51 GMT
Try explaining everything on this thread to a confused and angry lender on the telephone, hence the need for simplification. You have to admit, though, that the reason lenders might be angry and confused is that the system doesn't do what the website very strongly suggests it does do, and indeed what your IT guys originally swore it did do -- as I pointed out early last year.
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Post by Deleted on Jun 14, 2015 9:22:11 GMT
I've always found it baffling that people complain about not always having time to look and adjust etc especially given proliferation of smart phones. I'd have thought it takes about the same time as nipping for a pee to sort out your rate. In fact you could even multi task.... sent from my Iphone on the toilet. Now that explains your monika of p2p lender
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Post by rarrar on Jun 14, 2015 9:27:34 GMT
A quick read of how Market rate is and will be calculated suggests that it may rise relatively. Crudely at present MR is set to the minimum of the rates loans are matched over an unspecified? period ( excluding low outliers) In future it will be the weighted average of the rate loans are matched on the preceeding day. My feeling is that the former must be less than the latter. Also the amount of business done at higher YRs will push the next days MR up. Or have I got this completely wrong ? It depends. If there are enough people with a YR below say 6%, currently they are gettimg 6.4 to 6.8 because MR is above their selected rate. When the change is implimented, they will get exactly what they asked for so rates below 6.0 will get matched at the set rate and result in a lower overall average leading to tomorrows MR being lower and ultimately lowering tomorrows overall average etc. until the new equilibrium is reached. I suspect the effect of this will be less to do with the repayments but more the droves of new money that see £200K of money at x% and feel the need to undercut it in order to get it lent out quickly but the combimed effect of all of this will be to drive rates towards the lowest rate offered (which is probably a stranded rate that under the current system doesn't need changing). Maybe an option to Lend new money at the MR should be offered, this would make it very simple for new investors to get a sensible rate for their money without having to analyse and understand the "Full Market View of rates" - MR is available for reinvestment so why not for New Money? Keep it simple , MR or YR available at all stages. Show MR rather than latest match on the Lend pages. I am far more likely to use the new MR for reinvestment in future as it will be based on an average and not a minimum which could be based on someone dumping some new money at an "inappropriate" low YR.
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Post by brokenbiscuits on Jun 14, 2015 10:22:15 GMT
I would say that unless you receive the email the moment it is sent...
Any funds lent out at below market rate will be snapped up before you get a chance to read and react to the warning.
The email will be only good for changing tomorrow's rate. Most likely too late for the day's lending though
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gnasher
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Post by gnasher on Jun 14, 2015 14:41:09 GMT
Thanks westonkevRS, I look forward to an explanation of how the 2dp MR works. In addition could you clarify the other point about rates, (... unless someone else jumps in) My last match was at 6.8, this is from the contract: Date Friday 12 June 2015 Term 60 month(s) Interest Rate 6.60% Lender Return 6.8% which also says under definitions "“Interest Rate” means the interest rate agreed between the Lender and the Borrower". So that is 6.6% not 6.8%? My understand was that lenders do not pay any fees, these are paid by the borrower. I have tried to understand this by looking at the FAQs. It says " The rates of return displayed on the website are after our fees have been deducted, so essentially, the rate you see is the rate you will receive (my bold). If you look in your contract you will see the "Base Rate" which is the underlying rate of interest that at which you have been matched with a Borrower. The contract rate will be higher than the Base Rate, as this is the rate we would have to set to achieve your chosen rate e.g. if you set your rate at 5%, we may set the contract at 5.4% in order to achieve your requested rate of 5%"
My contract does not specify "Base Rate" or "Contract Rate", only "Interest Rate" and "Lender Return", with the latter being the 6.8% that I set. Is Lender Return" the same as "Base Rate"? It looks like it shoud be, however the FAQ indicates that there should be a "Contract rate" higher than the Base Rate, but instead of that I see a "Interest Rate" that is lower. Very confused, can anyone explain please.
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Post by westonkevRS on Jun 14, 2015 15:17:31 GMT
The interest rate is what the borrower pays and the lender gets without reinvestment. The rates quoted do not have any fees, but they are an AER that assumes reinvestment. In your example the 6.8% assumes reinvestment, but the borrower is paying 6.6%.
The Market Rate is a return with reinvestment assumed. Our back office actually calculates down to an assumed borrower rate without the reinvestment, and that is what goes into the contract and is the lender initial return.
All the P2P firms quote an AER that assumes reinvestmanet, as do the banks. Although this is easy because most savers do not extract the interest or any capital monthly, so it is by default an AER with reinvestment.
Kevin.
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gnasher
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Post by gnasher on Jun 14, 2015 16:55:14 GMT
Thanks Kev, for a non official spokesman on behalf of RS you are doing a great job.
So do I conclude correctly that your FAQ text is out of date now? Just checked on one of my very early loans in 2012. It was at 5.3%, but the actual loan rate as in the contract is 5.76%. So that matches the text in the FAQs, i.e. a higher rate than the bidding rate is in the contract. It is now the other way round with no obvious explanation that the difference between the 2 is the difference between assumed reinvesting and not reinvesting. I think your FAQs need to be updated and made clearer.
How many of your lenders understand that they only get the match rate if they reinvest?
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mikeb
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Post by mikeb on Jun 14, 2015 19:57:43 GMT
sent from my Iphone on the toilet. Now that explains your monika of p2p lender Not a good time to be receiving a 2% splashback.
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Post by westonkevRS on Jun 14, 2015 21:24:47 GMT
Thanks Kev, for a non official spokesman on behalf of RS you are doing a great job. So do I conclude correctly that your FAQ text is out of date now? Just checked on one of my very early loans in 2012. It was at 5.3%, but the actual loan rate as in the contract is 5.76%. So that matches the text in the FAQs, i.e. a higher rate than the bidding rate is in the contract. It is now the other way round with no obvious explanation that the difference between the 2 is the difference between assumed reinvesting and not reinvesting. I think your FAQs need to be updated and made clearer. How many of your lenders understand that they only get the match rate if they reinvest? gnasher I agree about the FAQs probably being out of date. The lenders section talks about a "base rate" which isn't actually on any of the new lenders contracts any more (not mine, at least). I'll challenge this on Monday. The part about interest rate vs. lender rate is as I described it though. I recently matched at 6.7% and my contract includes: - Date Thursday 11 June 2015 - Term 60 month(s) - Interest Rate 6.51% - Lender Return 6.7% I think most lenders do know that they have to reinvest to get the lender return matched, or at least that's the feedback from Customer Services. And either way I think it's quite clear the difference to interest rate and lender return as it's in the contracts (above) and in the FAQs which state " ... our displayed rates of return assume that a Lender is reinvesting their repayments in the same market, at the same rate. If your calculated rate of return is less, this may be that you have not reinvested your repayments, or have reinvested them at a lower rate than the original rate you agreed. "
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sl75
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Post by sl75 on Jun 14, 2015 23:47:54 GMT
That's the thing with YR, it worked fine 95% of the time. But when a strange combination of MR moving down and reinvested money not all gettting lent then it could caused confusion. Try explaining everything on this thread to a confused and angry lender on the telephone, hence the need for simplification. ... and how are you going to explain to a confused and angry lender on the telephone that RS have unilaterally reneged on the agreement that was explicitly stated at the time of setting a "your rate" - i.e. that "if the Market Rate is higher then the order will be submitted at Market Rate"? The fault giving rise to the "confused and angry" phone calls (i.e. that when the market rate falls, the system inexplicably treats "Market rate" orders differently to "your rate" orders that the system itself increased to match a higher market rate) could and should have been fixed a long time ago, independently of this new interpretation of what "market rate" means. I don't see anything fundamentally wrong with a "your rate" defined in the new "simplified" manner, but only in circumstances where that is what the lender agreed to at the time of placing their "your rate" re-investment instruction. Any existing "your rate" settings (and especially those where the selected rate is below the present market rate) have not agreed to the new regime where RS will renege on the promise to increase the rate to market rate if higher.
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Post by westonkevRS on Jun 15, 2015 6:06:06 GMT
That's the thing with YR, it worked fine 95% of the time. But when a strange combination of MR moving down and reinvested money not all gettting lent then it could caused confusion. Try explaining everything on this thread to a confused and angry lender on the telephone, hence the need for simplification. ... and how are you going to explain to a confused and angry lender on the telephone that RS have unilaterally reneged on the agreement that was explicitly stated at the time of setting a "your rate" - i.e. that "if the Market Rate is higher then the order will be submitted at Market Rate"? The fault giving rise to the "confused and angry" phone calls (i.e. that when the market rate falls, the system inexplicably treats "Market rate" orders differently to "your rate" orders that the system itself increased to match a higher market rate) could and should have been fixed a long time ago, independently of this new interpretation of what "market rate" means. I don't see anything fundamentally wrong with a "your rate" defined in the new "simplified" manner, but only in circumstances where that is what the lender agreed to at the time of placing their "your rate" re-investment instruction. Any existing "your rate" settings (and especially those where the selected rate is below the present market rate) have not agreed to the new regime where RS will renege on the promise to increase the rate to market rate if higher. I'm unsure of the specifics, but all existing customers with existing YR settings will be notified and given the choice to take their money off the Market or change their old YR settings onto the new YR to a higher rate. We know not everyone reads our blogs, this forum, their emails, web page notifications or our social media sites - so no doubt there will be some manual intervention as well where people have a YR lower than the MR so that do not suddenly lend their money at a lower rate than MR. If the YR is set to lower than the Market Rate the logical thing would be for us to turn off the YR, otherwise under the new "regime" there money would be lent at the lower YR. If the YR is higher than the MR it won't make any difference because their money would be lent correctly with a spike under the old or new regime. Therefore the easiest approach will be to remove everyone off the old YR and notify/contact. We certainly wont "renege" on a promise. Nobody offers a specific service or functionality ad infinitum. Things change and you should be able to trust RateSetter to manage our customers fairly through the process. It would be a failing on our part if anyone lost income, i.e. customers with a low YR. @ westonkevRS
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Post by westonkevRS on Jun 15, 2015 14:39:07 GMT
If the system shows the bulk of that days MR orders going in at say 6.5%, does that mean that they are somewhere between 6.45% and 6.55? or between 6.50 and 6.59%? i.e. does a market rate of say 6.57 get displayed by the system as 6.5 or 6.6? gnasher, Sorry if I got you worried, but despite the potential two decimal places that could be calculated for an underlying 'Interest Rate', when the MR is calculated this is rounded to be just 1 decimal place. So there is no point hoping to get to the front of the queue using the same .x% bucket; you've got to set a full 0.1% lender return below the MR In terms of any confusion around two decimal places, which occurs in the ‘Interest Rate’. The order matching process occurs to two decimal places (as reflected in each Lender contract where the ‘Interest Rate’ is shown to 2 decimal places). This means that there are 10 different interest/base rates that can match to the same lender return (and therefore MR). Lender base rates are set by many different processes (lender orders, reinvestments, sellouts, forced fills). So it is possible that the same MR expressed as a lender return is in fact at a different interest/base rate. For example previously "Market Rate Base Rate" has been at 5.75 and 5.84, both of which match to a lender return of 5.9% and potentially a MR of 5.9%. It is possible that money can be stranded if you have chosen to set “Your Rate” and it is below or at that day’s MR and the order has not been fully matched on that day and there has been a subsequent change in the MR base rate such that the interest/base rate is lower at the same lender return. This is an unusual event. westonkevRSwww.linkedin.com/profile/view?id=19236219
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jlend
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Post by jlend on Jun 16, 2015 12:22:57 GMT
I assume ratesetter has done some modelling on the impact of the changes,albeit difficult to do? I am not sure what can be shared with lenders though or what might be useful. Be interested to know as i think about what to do now YR is changing.
Sorry if this has already been asked,answered. For example:
There is mention of money at YR being stranded,albeit not often. How often does this occur? What is the value of this?
Are there stats on how many times currently YR is set below MR ? Has any modelling shown what the impact of the change might be?
The change to MR. What impact have you assumed this would have had on the MR,if it had been in place over the last few months ?
What impact do you think the change to YR and MR will have on the MR combined? I assume this will be difficult to assess given the two changes will happen at the same time.
I will understand if this sort of information is not availble, i assume some modelling has been done though ?
Have you thought about staggering the changes,perhaps doing the MR one first ?
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Post by westonkevRS on Jun 16, 2015 13:37:58 GMT
There is mention of money at YR being stranded,albeit not often. How often does this occur? What is the value of this? Are there stats on how many times currently YR is set below MR ? Has any modelling shown what the impact of the change might be? The change to MR. What impact have you assumed this would have had on the MR,if it had been in place over the last few months ? What impact do you think the change to YR and MR will have on the MR combined? I assume this will be difficult to assess given the two changes will happen at the same time. Have you thought about staggering the changes,perhaps doing the MR one first ? Around 20% of money on the markets has a YR set. This doesn't nessarily mean it's stranded as when we speak to customers they are happy to leave the money "resting" at the higher rate. Although this is a strange response (in my opinion) because if RateSetter had done more loans on the day their money would have gone. Around 2,000 lenders have a YR set below the MR We've done no modelling on the impact, remembering we are doing these as the right thing to do rather than looking for an outcome. Either combined (as they are being changed for independent reasons) or individually. I do not know if the MR will stay flat (probably) or increase/decrease. I personally think it could lower the MR slightly as the average matched should be lower than that offered. However the previous method was dependent on how many active lenders set a low offer at an ungodly hour vs customers completing on loans. This strange situation could cause unwarranted movements upwards or downwards. Hopefully the new SONIA style will bring stability and accountability Brand/Marketing wanted to stagger the change, but it was easier technically to make the changes in one go as we have scheduled releases to IT (we've grown, it isn't as immediate as it was in the golden days). Besides, big bang is always better in the long run.... @ westonkevRSwww.linkedin.com/profile/view?id=19236219
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spiral
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Post by spiral on Jun 16, 2015 15:12:32 GMT
Around 20% of money on the markets has a YR set. Around 2,000 lenders have a YR set below the MR Kev, thanks for sharing the facts. If I understand this correctly, this means about 4500 lenders have a YR set and of those, nearly half have it set at below MR or are you including accrued repayments that may not have gone out in months as you refered to "money" as opposed to "lenders"?
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