Invest through the RateSetter IF ISA tax-free ‘wrapper’.
Invest in a portfolio of loans to businesses, property developers and individuals.
A buffer against poorly performing loans with a 100% track record.
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*4.9% annualised rate is the 3 month average on the 5 year market on the 1st March 2018.
Active loans figures correct as of 1 March 2018
Version 1.00: table updated on 1 March 2018.
We never forget we're looking after your money. We take a careful approach to lending and only lend to borrowers who are creditworthy when the loan is granted and can demonstrate that they are able to pay back the loan. Borrowers’ creditworthiness may change over time and cannot be guaranteed. Your investment and any reinvestments could be matched with new or existing loans to individuals (mainly lower risk but some higher risk), businesses, property developers and existing loans to other lending businesses (specialist financial businesses who lend onwards to individuals and businesses – now discontinued as a source of new lending).
Version 1.00: table updated on 1 December 2017.
RateSetter seeks to protect your investment through
Rigorous underwriting at application stage: robust credit and affordability checks on all borrowers.
Portfolio management: loan portfolio is diversiﬁed across many types borrowers in different sectors.
Thorough arrears management: for the small proportion of borrowers who miss payments, RateSetter’s specialist arrears management team has a 3-step plan designed to help get things back on track:
Debt review and affordability analysis to assess borrower's unique situation.
Consolidation strategy offered to reduce debt repayments.
Repayment plan adjustments to increase likelihood of full repayment.
The Provision Fund:
If a borrower misses a payment, the Provision Fund reimburses investors.
If the loan goes into default, the Provision Fund takes over the loan and repays outstanding capital to the investors.
Even after a loan is transferred to the Provision Fund, we continue making efforts to recover the unpaid balance. This cash flow is an incremental asset of the Fund, over and above the cash balances we show on the website.
Property development loans make up 11% of our active loan book and are performing in line with expectations, with 61 development schemes completed without issue. All property development loans are secured against the property at a maximum loan to value of 65%, so a default does not automatically mean a loss. Hence for property development loans that are in default, RateSetter examines whether maximum value would be delivered via an immediate sale or by completing the development and then selling it. If an immediate sale is the best option, we would proceed with that. In the scenario where maximum value would be delivered by completing the development, RateSetter would immediately step in to take control of the development; we would charge off the expected loss from the Provision Fund (rather than the full outstanding balance); and we would complete the development as quickly as possible, then sell it. If additional finance was required to facilitate the completion and sale of the property, that would come from the RateSetter market, with a ceiling for total lending of 80% of the property’s post development value (this threshold is kept under regular review).
The loan portfolio performance is monitored at aggregate and segment level to ensure performance remains within our risk appetite. You can track default metrics in the KEY INFORMATION section.
Investments with RateSetter are protected by the Provision Fund which provides a buffer against poorly-performing loans. The Provision Fund is designed to reimburse investors if a borrower misses a payment. If a borrower defaults, the Provision Fund would take over the loan, repaying any outstanding capital to RateSetter investors.
RateSetter aims to maintain the size of the Provision Fund so that it covers all expected future loan defaults with a safety buffer. This chart uses our performance data to illustrate how the Provision Fund buffer insulates investors against the effect of increased losses.
Provision Fund figures correct as of 1 March 2018
The Provision Fund spreads risk across the loan portfolio, so investors are vested in the performance of the RateSetter portfolio as a whole rather than just the performance of the loans they are matched to.
The Provision Fund has a 100% track record: to date, every one of our 59,204 individual investors has received back every penny of the £2,228,772,785 that has been lent. Despite this track record, the Provision Fund does not provide a guarantee, so your capital and interest are at risk if the Provision Fund is depleted by increased borrower defaults. Investments in peer-to-peer lending are not covered by the Financial Services Compensation Scheme (FSCS).
In 2017, RateSetter restructured its wholesale lending and as part of that restructuring now controls three businesses. All three businesses have outstanding loans with our investors, so new investments and any reinvestments may be matched with one or more of these loans.
For two of these lending business, the customers continue to repay their loans as normal. The loans are secured against assets and we expect the loans to be repaid in full. For the third business, loan repayments are being made by RateSetter. The loan was outside our credit policy so we thought it was fair that RateSettter as a company should stand behind these loans.
These actions are reflected in RateSetter’s performance figures.
Openness and Simplicity are important values for us at RateSetter, so we want to be clear with you about the risks of investing with us. We think that investors should be provided with the relevant information so that they can assess the level of risk and make an informed decision as to whether to invest. So in that spirit, here’s a summary of the key risks of investing with RateSetter.
Credit Risk is the risk that borrowers do not repay their loans. Peer-to-peer lending is not covered by the Financial Services Compensation Scheme, so your capital is at risk.
RateSetter seeks to mitigate this risk through rigorous underwriting at application stage, building a balanced and diversified portfolio and careful arrears management. In addition, the Provision Fund provides a buffer against poorly-performing loans.
As RateSetter investors only lend to borrowers who are creditworthy when the loan is originated, expected losses are low, but we're always focused on anticipating risks and developing appropriate mitigants. We monitor the performance of loans and run scenario tests to model the impact of changes in default rates on the Provision Fund.
In the event that credit losses were to increase significantly, the following things would happen:
The Provision Fund would reduce in value as it reimburses investors for missed payments.
The Provision Fund is large enough to cover credit losses up to 112% of expected losses. If credit losses rose above this level, the Provision Fund would be depleted and investors would earn less interest than they expected, but their capital would be unaffected.
If credit losses rose even further and exceeded 278% of expected loses, investors would start to lose capital, which means that they would get back less money than they put in.
In this instance, it may take longer than expected for investors to receive their money back and access to funds may be restricted.
If you want to release your investment, your matched loans will need to be transferred to other investors. There is a risk that no other investors are available at that time to replace your investment, so you may have to wait to receive your money. This rarely happens, but we want to be clear that access to your money is not guaranteed.
To access your investment early, log on to the members area on ratesetter.com, click on the 'Money Out' page and then 'Release Investment' to access your personalised quote, including fees. Should you go ahead and transfer your matched loans, we will return the money to your holding account the same day, subject to market liquidity.
If RateSetter ceases trading, we have a fully-funded run-off plan that would be activated and administered by a third party. Contracts between investors and borrowers remain binding and loan repayments and the Provision Fund would continue to operate.
During the run-off period, any monies owed to RateSetter would be used to cover the costs of the run-off process and ensure that contracts with borrowers are fulfilled and investors are repaid in line with those contracts. Investors’ money would always remain entirely separate to RateSetter’s money throughout any run-off process.
Capital and Interest Repaid on Withdrawal. Investments and Reinvestments matched with new and existing loans ranging from 3 months to 5 years, which repay over the life of the loan.
Earnings: Your capital and interest are repaid every month and are automatically reinvested in other loans, in order to maximise the interest you earn. If you prefer, you can choose to have the repaid capital and interest returned to you instead of being reinvested.
Access: You can access money invested in the Rolling Market without a fee, by transferring your matched loan contracts to an available investor and releasing your investment.
Capital and Interest Repaid at Term: Investments and Reinvestments can be matched with new and existing loans of 1 year loans which are scheduled to repay at the end of the loan term.
Earnings: Your capital and interest will be repaid at the end of the loan term. If your loans are fully repaid early your money will be reinvested according to your reinvestment settings.
Access: You have the option to transfer your matched loan contracts to an available investor and release your investment. A Transfer fee of 0.3% is payable, as you’re exiting your matched loan contracts before their term.
Capital and Interest Repaid Monthly: Investments and Reinvestments matched with new and existing loans up to 5 years, which repay over the life of the loan.
Earnings: Your capital and interest will be paid as the loans are repaid, usually monthly. If the borrower fully repays early your money will be reinvested according to your reinvestment settings.
Access: You have the option to transfer your matched loan contracts to an available investor and release your investment. A Transfer fee of 1.5% is payable, as you’re exiting your matched loan contracts before their term.
What do these rates mean?
These are the rates of interest you can expect to earn when your money is matched to a borrower. The rates vary by market and are a function of supply and demand on that market, i.e. the supply of money from investors and the demand for money from borrowers. To ensure a strong supply of borrowers into the RateSetter market, borrowers are matched to the lowest rate available when their loan is available for matching. These rates don’t take into account any tax you need to pay. Interest is paid with no tax withheld. Any interest you earn should be included as income when you submit your tax return.
Will my rate change?
You can expect to receive that rate for as long as you’re matched with that borrower. If you’re matched with another borrower in the future, it’s likely to be at a different rate. Investors in the Rolling Market are re-matched every month. Investors in the 1 Year and 5 Year markets, who have set their re-investment options to re-match them in the same market, are re-matched when their matched borrower pays off their loan, either in line with their repayment schedule or early. Investors can also set their re-investment options to credit any money from matched loan repayments into their RateSetter holding account, where it can be withdrawn or reinvested at a later date.
Set your own rate
You can choose to set your own rate for initial investments and any reinvestments, but you may have to wait longer for your investment to be matched if your rate is higher than the market rate. To match your money faster, you can choose the ‘Lend It Now Rate’ for new investments, which will match your investment to the next available loan. This will result in your money being matched faster but may result in you receiving a lower rate. For reinvestments, you can choose the daily ‘Market Rate’, which will match your loan with available loans on the day of reinvestment. The daily ‘Market Rate’ is set based on an average of matches over the previous 24 hours.
There are no initial investment fees or annual management fees when investing with RateSetter.
There are no fees when you request to ‘Release Your Investment’ from the Rolling Market. If you invest in the 1 Year market or the 5 Year market and want to ‘Release Your Investment’ before the end of your term, you will pay a Transfer fee. You can access a personalised quote for this fee in the Members Area on ratesetter.com.
Loan Portfolio figures correct as of the 1 March 2018.
These amounts are the total amount outstanding covered by the Provision Fund. Loans originated prior to 2014 amount to 0.4% of the portfolio are not included in the above.
Version 1.00: table updated on 1 March 2018.
The expected losses are estimated based on quantitative analysis of actual loss data.
Quarterly review: Expected losses on active loans are recalculated by our risk assessment experts every three months. The expected losses are estimated based on quantitative analysis of historical lending using industry standard techniques. For recent lending, we look at early arrears data to inform the decision around lifetime expected losses.
Expected Loss Committee: Expected losses ﬁgures are signed-off at RateSetter’s Expected Loss Committee, which comprises the CEO, CFO, Head of Credit Risk and Head of Commercial Credit Risk, before any updates are made to the official figures quoted on the website.
Board Risk Committee: The Board Risk Committee is responsible for signing off the methodology used in arriving at an expected losses prediction.
RateSetter offers you the opportunity to invest in a diversified portfolio of loans to individuals (mainly lower risk but some
higher risk), businesses, property developers and other lending businesses (specialist financial businesses who lend onwards to individuals and businesses – discontinued in December 2016 as a source of new lending). We no longer write new loans via other lending businesses. Existing loans are running down as they repay over time in accordance with their existing loan schedule. However new lender money may still be matched to existing loans when other lenders have exited early.
Your capital and interest are at risk if the Provision Fund is depleted by increased borrower defaults. There is no recourse to FSCS Instant access to your money is not guaranteed.
Your investment and any reinvestments could be matched with new loans or existing loans.
Your investments could be matched with:
Rolling Market: loans ranging from 3 months to 5 years, which repay over life of the loan;
1 Year Market: 1 year loans which are scheduled to repay at the end of the loan term;
5 Year Market: loans up to 5 years, which repay over the life of the loan.
You are appointing RateSetter as your exclusive agent to act in all matters relating to the origination, negotiation, administration and management of your matched loans.
We take a careful approach to lending and only lend to borrowers who are creditworthy when the loan is granted and who can demonstrate that they are able to pay back the loan. Borrowers’ creditworthiness may change over time and cannot be guaranteed. You can track default metrics in the 'Key Information' section of the RateSetter Members Area.
You can request what happens to your investment when your matched loans repay by setting your own re-investment options. If you instruct us to reinvest it, we will reinvest it in new or existing loans when suitable loans become available. Borrowers are matched to the lowest rate available when their loan is available for matching. If you choose to place your funds in a Holding account, these can then be withdrawn or reinvested at a later time.
The rate you receive is a function of supply and demand on the market; supply of money from...
investors and the demand for money from borrowers).
For new investments, you can choose the ‘Lend It Now Rate’, which will match your investment to the next available loan. This will result in your money being matched faster but may result in you receiving a lower rate.
For reinvestments, you can choose the daily ‘Market Rate’, which will match your investment with available loans on the day of reinvestment. The daily ‘Market Rate’ is set based on an average of matches over the previous 24 hours.
There are no initial investment fees or annual management fees when investing with RateSetter. If...
you invest in the 1 Year Market or the 5 Year Market and you want to access your money before the end of your term, you will pay a Transfer fee as your loans will need to be transferred to new investors. You can access a personalised quote for these fees in the Member Area on ratesetter.com.
There are no fees when you release your investment from the Rolling Market.
You can access money invested in the Rolling Market at any time without fees, provided there’s another investor available to take your place in your matched loan contracts.
For 1, 3* and 5 year investments, you have the option to transfer your matched loan contracts to an available investor and release your investment. A Transfer fee is payable, as you’re exiting your matched loan contracts before their term.
We will always provide you with an estimate of how much money you’ll release, including any earned interest and any Transfer fees payable.
*Please note: the 3 year market was closed to new investment in August 2016.
The Provision Fund is made up of payments received from every borrower, based on RateSetter’s
assessment of their creditworthiness when the loan is granted. RateSetter aims to maintain the Provision Fund at a level intended to cover all expected future defaults. The Provision Fund has a 100% track record to date; every individual investor has received the returns they expected. This is not a guarantee for the future and your capital and interest are at risk if the Provision Fund is depleted by increased borrower defaults.
Each investor is directly matched with one or more borrowers, but as the Provision Fund effectively spreads risk across the whole loan book, investors are exposed to the performance of the RateSetter loan book as a whole - not the performance of the specific loans they are matched to.
More information about the Provision Fund can be found in section 3 of this page. Please read this information as it indicates the extent to which the Provision Fund can be expected to cover loan defaults.
This is not a guarantee for the future and your capital and interest are at risk if the Provision Fund is depleted by increased borrower defaults.
In the past, RateSetter intervened with the restructuring of one of its major borrowers. As a result....
of this, RateSetter now controls three businesses.
All three businesses have outstanding loans with our investors. These loans are secured on the underlying loan portfolios of these businesses. New investments and any reinvestments may be matched with one or more of these loans.
In one exceptional case, RateSetter intervened to cover the debt repayments of a borrower from its own company funds that would otherwise have been defaulted to the Provision Fund. Such an intervention will not happen again.
Any conflict of interest is mitigated by ensuring appropriate separation of the relevant operational teams from the companies in which RateSetter has a stake. Any credit and/or lending decisions made by RateSetter in connection with companies that are part of the RMM group are made independently from the management of RMM’s equity interests in those companies.
You can contact RateSetter at [email protected] or by calling 020 3142 6226. RateSetter is a...
trading name for Retail Money Market Limited (company no. 7075792) and our offices are at 55 Bishopsgate, London, EC2N 3AS. RateSetter is authorised and regulated by the Financial Conduct Authority (Ref. 722768).