Ratesetter Investing past Its Prime

random12 on 21/01/2019 - 10:13
Last edited 21/01/2019 - 10:37 by 1 other user

Last year you get about 8% for 3Y and 9% for 5Y.

It has since absolutely tanked to 6% for 3Y and 7.5% for 5Y.

Also, the arrears statistics have gotten significantly worse as well with the generally worsening economic conditions, but dumb amateur investors continue to place lots of money at lower returns.

I haven't added any new loans in the last 12 months ( except a $180 repayment that I managed to reinvest at 12% for 5Y ). Other than that, I am just running off the loans and withdrawing everything as it gets repaid.

Financial

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Comments

  • Dacs on 21/01/2019 - 10:54
    +2

    Yeah I feel the same way about it.
    When I invested originally I got 8.7% on 3-year loans plus sign-up bonuses.
    The falling housing market may also mean an increase in defaults so I'd be wanting a higher nominal return now.
    Also I think Ratesetter is taking a bigger cut now than they were before, which would push down the returns.

  • tsunamisurfer on 21/01/2019 - 11:36
    +6

    When I read the opening line the first thing I thought of is this thread.

    https://www.ozbargain.com.au/node/314688.

    Turns out its YOU AGAIN.

    • random12 on 21/01/2019 - 12:44

      yup, and with the except of the small repayment that I managed to reinvest at 12%, I have not made any new loans (or even bothered transferring money in to try new loans) since that post.

      18 months of just withdrawing.

      • tsunamisurfer on 21/01/2019 - 12:57
        +2

        Financial Illiterati - 287,337 : Random12 - 0

  • Almost Banned on 21/01/2019 - 13:38
    +1

    Welcome to market economics.
    More money available to borrowers - fewer borrowers who want that money.
    Something's got to give - and that thing is the rate. People are trying to make their money more attractive to borrowers.
    This is how it works. Isn't it great!?!

    • random12 on 21/01/2019 - 16:09
      -1

      Well, no it's not exactly how it should work.

      Yes there should be some relation to supply/demand, but there should also be risk calculation as well.

      Right now, everyone views ratesetter as 'Risk Free' (even though RateSetter has definately put out their mandatory disclosures saying stuff like 'the provision fund may not always protect your investment'). So dumb lenders are more than happy to dump money at lower and lower rates.

      • watwatwat on 21/01/2019 - 16:17
        +2

        Well, no it's not exactly how it should work.

        It's supply/demand. No point getting emotional over something that's operating just fine.

        Also UK ratesetter has always been lower, such as 6% for 5 year market. Where you think 8% is under rate, some people think is over. http://ratesetter.co.uk/

      • peter05 on 22/01/2019 - 10:01

        there is a risk calculation involved, just that your appetite for risk is lower than others, hence their rate being lower than yours.

        everyone is in a different situation and although you may criticise or have opinions about their lending practices, these are just simply market dynamics working as intended.

        • random12 on 22/01/2019 - 10:16
          -4

          No, for it to be a true 'market' would require the ability for everyone to both ' buy and sell ' loans.

          So yes, learn some economics and the actual assumptions behind the perfect 'demand/supply' theory.

          'working as intended' - are you sure that's how it was 'intended'? If you cannot see the subtle differences between this, and a ' pure market ' then you should not be pretending to be an expert.

          • peter05 on 04/02/2019 - 16:48

            @random12: Are you sure you dont have the wrong idea of what a pure market is?
            http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=pure…

            The market is absolutely working as intended. Every purchase and sell decision is based on individual participant's factors in the market

            a) how much do i have
            b) how much do i need
            c) what is each unit worth to me

            If you have no water and are in dire need of it, obviously you will value it higher than someone else who lives next to the ocean.

            Likewise, if you don't need the money anytime soon, maybe a reduced rate of 6% is still a good return. It appears that in your situation sitting on an ivory tower calling everyone under bidding you morons, you prefer higher returns. Nothing wrong with that, just that the MARKET is dictating that you're asking too much.

            As I pointed out earlier, perhaps your assessment of the risk involved with lending on these P2P platforms should involve an interest rate that is higher than it currently is. As an informed trader, you should stick to your assessment and not bow and lend at reduced rates. When the market fails, you will be able to lend at your higher rate because others who have been underbidding you will have been burnt by defaults

            So yeah, before you begin your lectures, why don't YOU learn some economics?

  • watwatwat on 21/01/2019 - 16:11

    I've been pulling out for the last couple years. My main reason is the tax is just insane. All interest treated as regular income so heavily taxed and can put people in a higher tax bracket.

    But yeah, I'm still letting my loans matched at 10% ride out. This was a better rate than people can get nowadays.

  • random12 on 24/01/2019 - 13:35

    Also, I guess I should have asked this before getting a meaningful exposure to ratesetter, but I guessed they looked legit enough and it did not bother me.

    But can anyone explain the info under 'RateSetter Data -> Provision Fund'.

    Particularly the arrears percentages.

    It looks like for the 'Loan Up to Date' they do $187,292,579/$198,042,263 = 94.57%

    Why do they report the percentage of 'Up to 30 days late' as N/A , when it should be $193,347/$198,042,263 = 0.0976% = 0.10% (when rounded to 2 d.p.). I am guessing it may be because it is so close to 0%?

    And why do the percentages not add up to 100%?

    Those four categories should cover all the cases (unless they are trying to be tricky and say that 30 days is different from 1 month, but that still would account for the difference).

    $187,292,579 + $193,347 + $1,575,878 + $3,293,708 = 192 355 512

    Where is 198 042 263 - 192 355 512 = 5 686 751? I guess it's not current, but we don't know if its 0- 30days, 31 - 59days or 60days+ (And common terminology is to refer to a month as 30 days, regardless of actual day count).

    I emailed them about this before (actually back when I posted the previous thread referenced above) and they never responded with a good explanation

    XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Info from Ratesetter Site (since it won't allow screenshots) XXXXXXXXXXXXXXXXXXXXXXXXXXXXX

    Key Statistics Since Inception
    Claims on Provision Fund 100% of late payments and defaults
    Claims paid by Provision Fund 100% of total claim value
    Total amount lent $403,589,839
    Total principal repaid by borrowers $205,547,577
    Current funds on loan $198,042,263
    Current estimated bad debt rate* <3.8%
    Current estimated bad debt* $7,605,162
    Current estimated default coverage ratio* 1.5x

    Status Value % of total funds on loan
    Loan up to date information
    $187,292,579 94.57%
    Payment up to 30 days late information
    $193,347 N/A
    Loan 1 month in arrears information
    $1,575,878 0.80%
    Loan at least 2 months in arrears information
    $3,293,708 1.66%

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