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Post by mellbreak on Jan 12, 2016 17:17:10 GMT
Simple answer...it's not. Precisely. I like RS but wish they would sort out their transparency issues. In a properly functioning market, this would not happen. Would this not be the effect if there were lots of lenders in the 3-year market but few in the 1-year market? Presumably the laws of supply and demand apply separately in each market.
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locutus
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Post by locutus on Jan 12, 2016 17:28:10 GMT
Precisely. I like RS but wish they would sort out their transparency issues. In a properly functioning market, this would not happen. Would this not be the effect if there were lots of lenders in the 3-year market but few in the 1-year market? Presumably the laws of supply and demand apply separately in each market. The problem is that on the buyer side of the equation we have RS and not the borrowers. RS have perfect information which puts the supply side at a disadvantage. Don't forget RS also can lend short term money (monthly market) for long periods (up to 5 years I believe) which also distorts the market. Whatever the cause, the fact that I can lend for 1 year at more than I can for 3 years is evidence of a broken market.
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locutus
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Post by locutus on Jan 12, 2016 17:47:12 GMT
3 year market is now at 3.8% which is very close to what can be got on the monthly market. Can anyone keep a straight face and tell me this is working as it should be?
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oik
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Post by oik on Jan 12, 2016 18:35:46 GMT
Precisely. I like RS but wish they would sort out their transparency issues. In a properly functioning market, this would not happen. It's very much a "a riddle, wrapped in a mystery, inside an enigma" and that seems to be the way they prefer it. I don't see any ambition on their part to make it more transparent though the lack of transparency is likely to be a serious problem for them if they would like to progress beyond being a very small operation and the interest of the press and consumer groups results in more questions.
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oldgrumpy
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Post by oldgrumpy on Jan 12, 2016 18:46:14 GMT
Precisely. I like RS but wish they would sort out their transparency issues. In a properly functioning market, this would not happen. It's very much a "a riddle, wrapped in a mystery, inside an enigma" and that seems to be the way they prefer it. I don't see any ambition on their part to make it more transparent though the lack of transparency is likely to be a serious problem for them if they would like to progress beyond being a very small operation and the interest of the press and consumer groups results in more questions. So, with all the fluctuation and intrigue as described, I suppose we could call these the Enigma Variations ...... (ahem ...)
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Post by westonkevRS on Jan 12, 2016 20:13:42 GMT
Precisely. I like RS but wish they would sort out their transparency issues. In a properly functioning market, this would not happen. Would this not be the effect if there were lots of lenders in the 3-year market but few in the 1-year market? Presumably the laws of supply and demand apply separately in each market. I can keep a straight face because I know the facts. There is an imbalance because lenders have remained stable but borrowers in the 3-yr market have reduced. It's not a popular borrower market, and for commercially private reasons its become less so. So the laws of reduced demand and stable supply has lowered the lender returns. @ westonkevRS
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locutus
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Post by locutus on Jan 12, 2016 22:16:10 GMT
Would this not be the effect if there were lots of lenders in the 3-year market but few in the 1-year market? Presumably the laws of supply and demand apply separately in each market. I can keep a straight face because I know the facts. There is an imbalance because lenders have remained stable but borrowers in the 3-yr market have reduced. It's not a popular borrower market, and for commercially private reasons its become less so. So the laws of reduced demand and stable supply has lowered the lender returns. @ westonkevRS Kev - you have nicely illustrated the issue I was pointing out. Stating that you know the facts but that they are private just underlines how opaque things are for lenders. Like I said, I like RS but I think more transparency would be better for borrowers, lenders and RS. Anyway, can you confirm or deny whether money on the monthly market is being used by RS to lend to borrowers for periods of 3 years or more? That might explain some of the fall in demand in the 3 year market.
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Post by westonkevRS on Jan 12, 2016 22:27:09 GMT
Yes, I've said before that a small percentage is used for longer dated loans. But this hasn't changed, and besides is relatively small and won't influence the markets. RateSetter has not altered the lender supply across markets.
The recent change to rates on 3 years is a reduction in our allowable borrower demand, whilst lender supply has remained. Over time if the borrower demand doesn't rise then lenders must acept the lower returns, shift markets, wait, or depart.
Kevin.
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locutus
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Post by locutus on Jan 12, 2016 22:55:44 GMT
The recent change to rates on 3 years is a reduction in our allowable borrower demand... Can you clarify what this means please?
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alender
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Post by alender on Jan 13, 2016 0:04:55 GMT
Can anyone explain why the 1 year rate is 4.5% but the 3 year rate is 4%. To me, this normally indicates that a market is not functioning properly. That is because it is not a Market in the true sense of the word, there is a Market for lenders but only one borrower, RS who sets the borrowing rate and then lends out to the actual borrowers at that Rate plus additions to the rate for RS profits, provision fund etc. I have said before the way rates are set is as clear as mud and in IMHO the best I can come up with is that it is RS intention to reduce the rates in order to increase the lending and therefore their market share and which lead to higher profits for RS. Also the one month and one year market are used for loans for longer periods, it is a way RS can finance longer term loans at a lower rate.
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sl75
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Post by sl75 on Jan 13, 2016 10:48:37 GMT
I can keep a straight face because I know the facts. There is an imbalance because lenders have remained stable but borrowers in the 3-yr market have reduced. It's not a popular borrower market, and for commercially private reasons its become less so. So the laws of reduced demand and stable supply has lowered the lender returns. There's also the structural problem that lenders are not permitted to make their funds available for "up to 3 years" - they must choose to place the funds on offer in exactly one market. I had funds on offer earlier this month at 5.2% in the 3 year market. A short-term spike in the 1 month market reportedly took money offered to that market at 100% in preference to mine, which I'd have been perfectly happy to have lent for 1 month at 5.2% in the absence of a match for 3 years, but had no way to tell the system my preference in this matter. Eventually, when this didn't result in a match, that (admittedly very small) tranche of funds got removed from the marketplace completely. Now some further repayments have occurred, and are also offered at 5.2% until I accumulate a large enough balance to make it worth withdrawing. Perhaps such a rate might become available in the 1 year or 1 month market before it becomes available in 3 year - unless I log on regularly to watch the market like a hawk (or write a bot to do that for me), I'll never know. (Further, I'd also be happy to re-lend that money at up to about 4.4 years, to be repaid in full before the end date of my most recent 5 year contract, but have no way to express that preference either - I'm forced to choose 3 years despite the existence of occasional 4 year contracts for which I'd be willing to undercut the going rate on the 5 year market). A simple tick box to "accept matches at the same rate in shorter-term markets" when placing an offer would do much to restore balance in the marketplace... and also allow RateSetter to open up more markets without this causing further volatility.
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oldgrumpy
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Post by oldgrumpy on Jan 13, 2016 11:28:17 GMT
"A simple tick box to "accept matches at the same rate in shorter-term markets" when placing an offer would do much to restore balance in the marketplace... and also allow RateSetter to open up more markets without this causing further volatility."
That's a useful idea.
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Post by GSV3MIaC on Jan 13, 2016 11:36:23 GMT
About a year ago I suggested similar .. i.e. being able to offer the same slug of money at x% for 3 years, y% for 5 years (plus rates for monthly and annually if you like) and to take whichever matched first, avoiding me moving money around on a regular basis. Of course that's more complicated than 'the rate to lend at right now ..'. 8<.
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Post by mellbreak on Jan 13, 2016 11:58:21 GMT
I take it then that if I have £5k on offer at 6.2% and the best borrower offer is for £5k at 6%, they will never match each other and I will never see the offers that do match, as neither of them will appear on the "market view". The borrower has to wait until someone else offers to lend £5k at 6%, and I have to wait until RS find another borrower to whom the best they can offer is my 6.2%. Not quite true no. This is true in the scenario outlined by oldgrumpy where a majority of the offers on the markets are " engineered", in that RateSetter show all offers to give a full picture of the market. They are all actual borrower offers (i.e. engineer doesn't mean made-up) but in reality have already been matched. However sometimes a borrower actually does make a lower offer and is waiting for a lender to reduce his rate, as you indicate. In this instance if you lower your rate you will be matched specifically to that borrower. Kevin. To get back to the original topic, would it not therefore be more accurate for the "Market view" table to be labelled "Unmatched lender offers" instead of "Lender offers" and "Recently matched lender offers" instead of "Borrower offers" ? The statement that is displayed on the market view when you click "Placing your first order?" is also misleading. It says "On the left are unmatched Borrower requests. If there are unmatched Borrower requests, you can lend immediately or ask for a higher rate" but according to what Kevin says above, these are matched requests, not unmatched. Presumably you can lend immediately only if RateSetter offers your money to other borrowers at the rate shown.
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