A few thoughts - Lower target rate? Platform risk?

Brainer - you ask two very good questions, taking the easiest one first:

"Does BondMason review platforms regularly" - yes. This is a key aspect of our service. Understanding the changes and demands on a platform plays a significant role in determining which platforms to continue to work with and which loans to filter.

"Rates coming down" - I think it's important to understand why rates are coming down with some P2P lenders, and whether rate reductions are driven by individual platform supply & demand; or market supply & demand. Over the last few years, it has been 4x easier to get £1 from an investor (lender) than lend out £1 to a borrower, so there will be pressure for P2P platforms to reduce borrower rates to capture market share:

 - Individual platform supply and demand: this is the one to be most cautious of. Ratesetter, by their own definition are the most pronounced example of this - matching the rate of the borrower demand to the rate of the supplier demand across their own platform. For the reason stated above, they are generally an early mover in reducing rates. Particularly as investor funds are reasonably "sticky" - i.e. it will take a 2-3% reduction in lender rates before people start switching meaningfully.

 - Market supply & demand: this is the more reasonable reason to reduce rates, and the rates should be viewed in the context of the overall lending market, not just P2P.  However, as we all know, the banks haven't been active lenders in many of the P2P categories, so it may be harder to get a feel for the true market rates.  Our feeling is that P2P is increasingly competing on price (not just convenience), and so rates from P2P providers can be lower than some other traditional providers of finance on a like-for-like loan. (It used to be the case that borrowers on P2P platforms simply couldn't get access to bank loans, but this is changing).

So what can you do about it:  we are comfortable with lower rates as long as they reflect lower risks.  And we always look at the spread (or risk premium) from one lending asset class to the next - as the highest risk loans become the biggest areas of concern and become the most mis-priced during a period of rate reduction (the risk premium contracts here quickest during rate reductions).  We tend to operate most at the lower end of the risk spectrum.

In benign economic conditions (prolonged low interest rates - which aren't going anywhere soon) borrowers are typically able to service their debts reasonably easily. So the key credit question becomes their ability to refinance the loan - either through amortisation or at the end of the loan.  We focus on amortising loans and asset-backed lending (property, assets etc), as this reduces the refinance risk.  

Something else to note in the current economic environment, is the higher inflation, which actually de-risks asset-backed lending further as asset values generally stay higher (i.e. have a shallower depreciation curve in nominal terms - as it should be the same curve in real terms). 

Our rates: finally, to answer your question directly, we are not looking to reduce our rates. We did tighten our criteria immediately post Brexit, which saw the gross average drop from 9.0% to c.8.5%. But we are not looking to reduce this to a level which will require the 7.0% target to be revised.

Hope that helps!