ratesetter: giving santander the middle finger
I first heard of P2P lending a few years ago, very soon after I started on this journey to the land of FIRE. “This is for me!” I thought almost immediately, I really liked the idea of both savers and borrowers getting a better deal from these companies than they could do from high street banks.
Then I promptly did nothing about it for about 3 years.
The reasons I had were fair enough:
- I wanted to get some money into tax wrappers and in stocks and shares first of all
- I was only just starting out on building a portfolio of investments and it’s best not to keep more than a few percent of your diversified portfolio with any one P2P provider.
- Therefore I couldn’t see the point in only investing only a few hundred into one, it just didn’t seem worth the hassle.
- Also with the Santander 123 account paying out 3% interest on the first £20K and with no real risk it seemed pointless trying to take on more risk just for a couple of extra percent interest
Now I’ve been building some equity in tax wrappers over the years, pound by pound, so have been knocking on the door of being ready to put some of our funds into P2P, but have found it hard to pull the trigger, until very recently when this news from Santander came through the post:
Bit of a game changer, right?! And I’m sure many of you shrewgal 1 folk out there in the FIRE community will be affected by this.
So it seemed like a great time to get involved with the Ratesetter £50 Bonus Offer 2 which has been flying about for a while now. Here is some information you might be wanting to know about before you trust these guys with your hard earned moolah.
£50 free? What’s the catch?
There are two catches as such but they minor ones from my point of view:
- You have to invest a minimum of £1000 – As I mentioned earlier I don’t really see the point in going with much less than this in any given investment, or you’ll be spreading yourself too thin across too many different types of investment or company. I mean, remembering all of the logins would be a nightmare for a start 🙂
- The £1000 must be full invested for a whole year – Again, no big deal, right? Why would you be investing at 4-5% for less than a year? I’m not sure. That’s what holding cash in the bank is for.
So with those two minor hurdles out of the way I stumped up the bag of sand 3 required and put opened up an account.
you won’t believe this…
…but what surprised me the most about Ratesetter was that it has a nice and simple UI 4 for a financial services website… seriously!
Here are a few screenshots of the sign up process and user interface to show you roughly how easy/hard it is (I found it pretty easy obviously) to sign up and see what’s what…
The five step sign up takes 5 minutes by Ratesetter’s reckoning, my experience of that was about right!
I chose to lend in the 5 year market as it had the highest rate, but you will get the £50 bonus after funds are in there for just one year. You can also sell out your investment early if you really need the cash back but obviously will lose some money if you do that.
I’m not planning on needing this grand any time soon so hopefully it can sit in there and be worth £1294 nominally after 5 years.
I’m guessing you’re wondering what the other rates and timescales available are. Here are the last rates matched which are displayed on the left hand side every time you log in:
Once you’ve selected your product you can also select the rate you want to achieve. I thought I’d be bold at go in at 5.3% even though the lender queue was at 4.9% for the 5 year product. I thought well if it takes 2 or 3 weeks to get matched it will be worth it over 5 years to get that extra few a percentage points. You then get to see the dashboard which gives you an overview of your matched or unmatched money and various other options down the left hand menu:
I logged off and then was very pleasantly surprised to receive an email not 5 minutes later to tell me my money had already been matched to a borrower!
So far, so easy! (Although thinking maybe I should have tried for a higher rate!?)
I will now look forward to receiving payments and interest paid back every month and also the £50 bonus in a years time. They even tell you exactly how many days left until you will get your bonus, nice touch:
I will probably experiment with putting in some higher percentage offers and seeing if they get matched, but even if they don’t, 5.3% is not to be sniffed at in this ZIRP 5 environment.
SIPPs and ISAs
One extra interesting thing to note is that you can already invest with Ratesetter into a SIPP to take advantage of all the lovely deferred tax benefits they offer. And apparently an ISA option is coming soon. Back of the net!
would you risk it for a chocolate biscuit?
This post would not be complete without talking about the risks of P2P lending. In particular hammering home the point that Ratesetter is not a bank and therefore not covered by the FSCS protection.
This means that 1) if the company goes down the pan or 2) there is a massive default rate by the borrowers you are matched to, you could lose all your capital.
However it is worth noting that scenario 1) is extremely remote and scenario 2) is covered pretty well by Ratesetter’s Provision Fund, which they’ve been building up in case of unexpected number of loan defaults. They are so transparent 6 you can even view this fund in real time, here is a screen shot at the time of writing:
Some more real time info on the state of the books:
And some historical performance to put things into perspective for you:
conclusion
In case you hadn’t guessed by now I was really impressed by Ratesetter, mainly just by the website and how easy everything was, and how many real time stats and historical data they had directly to hand. You sometimes have to dig deep for this sort of info but it was just all there right off the bat. Other financial websites, please take note!
The headline high interest returns and £50 bonus are what hooks you in but I think you’ll end up staying for the other reasons mentioned above.
Have you had any dealings with Ratesetter or other P2P platforms? Let me know of your experiences in the comments below? Cheers!
Just in case you missed the hundreds of links to the bonus offer in the main text here is another one 🙂
Click here to take advantage of Ratesetters £50 sign up bonus offer
Notes:
- Yes that’s right, I just made up a new word by merging shrewd with frugal. I know what you’re thinking: #amazeballs ? Maybe not 🙂 ↩
- Full disclosure: all of the links to Ratesetter on this page are referral links and I will receive a sum of money if you sign up through it and take part in the £50 bonus offer. This does not affect your bonus in any way: it is paid to me directly from Ratesetter and not out of your bonus. If you would rather sign up without me getting any money that’s cool, just google ratesetter and click on the first link that comes up! If you do sign up through any links on the page I bestow good luck upon you and your family. ↩
- Grand = £1000 for anyone not au fait with cockney rhyming slang ↩
- User Interface ↩
- Zero Interest Rate Policy ↩
- Why can’t all companies be like this!? ↩
Discussion (37) ¬
I have much experience with Lending Club (member for 5 years or so) and this looks much different. On Lending Club, you choose individual loans to invest in, $25 minimum, allowing you to create an unbelievably specific portfolio. You can filter by reason for the loan, credit score, credit history, etc etc. And on Ratesetter, it looks like you just pick one of a few products and all the details are hidden?
It will be interesting to see how accurate that return is. I’m guessing 5.3% is after all the defaults are taken into consideration. I am actually starting to wind down my Lending Club account. The returns used to be an easy 11-13%. But with aging loans comes more defaults, and though LC says my return is 8%, I calculate it to be closer to 5%. Sounds familiar! 5% isn’t enough for me to get from P2P lending. I can get more in the stock market and without feeling the occasional shock of a bunch of loan defaults. Maybe the Ratesetter products are spread out across so many loans, it’s more of a sure thing? That would be a good thing.
Hi Norm,
There are other P2P sites where you can pick and choose loans over here as well and I will get round to having a look at those eventually (I think Funding Circle is one example) but Ratesetter’s model seems like a much nicer and easier intro into the world of P2P lending for my money.
5.3% is all but guaranteed by the Provision Fund unless the default rate goes sky high and I believe it would cover a worse default rate than has happened during the 2008 credit crisis.
So while not bullet proof, this seems to me a much better way than lending clubs method where you are at the mercy of who you picked to loan to.
I’d rather not have the hassle and stress of that, this is like passive P2P investing whereas lending clubs is like active stock picking, i.e. certainly not for me.
“I can get more in the stock market and without feeling the occasional shock of a bunch of loan defaults” – that seems strange logic, I mean I know the market “always goes up, eventually” there is a big emphasis on the eventually and if you don’t like the shock of a few defaults then god knows what your ticker makes of the mega volatile stock market! 🙂
Cheers!
The difference is that the stock market recovers. If a loan defaults, it’s gone for good. I guess the long term result would be the same, but seeing a bunch of loans randomly zero out is a sobering sight.
Have to say I was always skeptical of those 10%+ rates people were talking about with Lending Club, not that it really made much difference as the companies over here are totally different 🙂
Be shrewd, be frugal, be ‘shrewgal’! Lol, brilliant, best take a copyright on that, TFS!
I’ve been with Ratesetter for a couple of years now and I’m really happy with them. Rates have come down a little (top rate when I first joined was a little over 6% for 5 year loans) but still >5% is good. No defaults recorded yet in the time I’ve been with them.
Funding Circle is still where most of my P2P money is invested, purely because of the higher interest (around 8%) but of course, this means higher risk of default and I’ve had a few small ones over the past year. Even with the default, I think I’m still getting around 6%.
Good luck with Ratesetter – it does have a very good UI.
Hi weenie,
I guess it makes sense that rates have come down slightly seeing as the base rate has dropped and maybe people have finally realised it’s going to be like that for a very long time now (whereas say 5 years ago, maybe even 2 years ago actually I think(?), pundits were still saying a rate rise was imminent)
I definitely still want to give Funding Circle a go, when I’ve got another “bag” to spare I’ll drop you a line about the refer a friend scheme.
Cheers!
Hi TFS
I’ve been investing with RateSetter since early 2014 and now have a bit over £45k with them. I’m mainly in the 3 year income and have managed an annualised 5.1% since starting.
I have nothing bad to say. Easy interface, helpful customer services (I’ve had to use them twice when payments in failed, cause my current account bank) and the product does exactly as it says on the tin.
Good luck with it
RIT
Hi RIT,
Thanks for the input. Very useful to hear from someone with so much sloshing about in there.
Cheers and good luck with your impending ER.
Can I ask how you arrive at the £1294 figure after 5 years?
It’s worth remembering that after month 1 you will no longer have a grand invested as you will have received a repayment of both capital and interest. You would need to reinvest for another 5 years. If you keep doing this then your investment will never end.
If you take the repayments out each month you’ll end up with much less than the £1294.
I have my rate setter 5 year paying its returns into the (soon to be closed) 3 year market to keep it earning. My 3 year pays into the monthly market. My monthly pays into the monthly. If you catch my drift.
Hi Bob,
Of course that was my crude assumption and thanks for pulling me up on that one.
Your last sentence makes sense, that sounds like a good strategy to slowly get your money back out.
Cheers!
Good luck with it. I’ve got about 20k in Ratesetter at the moment, and have been doing it for the last couple of years. Satisfied with it so far, but also a bit wary, hence I do the monthly rolling reinvestment rather than locking myself in for longer. The downside, of course, being that I get only a similar return to a decent savings account with whilst carrying more risk.
You should be aware that should there be a liquidity issue in the monthly market then you might not get your money back for years rather than months. Like you say it’s not a bank.
Not untrue, Bob, but it’s all a sliding scale of risk. It’s not like banks can’t also have liquidity issues (see Global Financial Crisis circa 2008). Whilst I will be the first to agree there’s a much bigger risk of it all going tits up with RateSetter than a bank, Monevator had a post the other day on pretty much exactly the topic of why even cash isn’t 100% safe against the potential ravages of fate (http://monevator.com/is-your-cash-safe-in-the-bank/)
Hi FS,
That seems fair enough. Once you’ve milked TSB for all the accounts you can get then there’s not much else out there that pays what the rolling market is paying from what I can see.
Out of interest, where are you seeing the green “Welcome Bonus” banner? I signed up from somebody’s link a couple of months back, and I’m not seeing a countdown to my bonus anywhere, as far as I can tell…
Hi Leo,
It’s on the main account summary page as soon as I log in.
Maybe drop them an email to find out why you can’t see it?
Yeah, the Santander changes might have forced me into rethinking sitting on quite so much cash. A bit of a bummer really as I’ve got to balance the need for smoothing out my unreliable income against the potential for inflation nibbling away at the reserves.
I’ve been avoiding P2P quite deliberately for the last couple of years but, TBH, if the option exists to get my hands on the cash at short notice (albeit with more risk involved), I might have to shuffle £10k or so into something like RateSetter just to stop the rot! It turns out TSB won’t let me open 16 of their plus account (usefully, you can get 3 of them between a couple though).
The more manly option of course would be to say ‘to hell with a buffer’, fatten up the investment portfolio by £25k and rely on my sales skills to make sure we can eat.
Mmm, what’s RateSetter’s number again?
Hi LL,
We’ve managed to get 4 TSB plus accounts between the 2 of use so maybe try to open another one and see what happens?
I don’t like the sound of the manly option, as that is taking away so many of the benefits of the flexibility of being semi FI. I know you know this already of course 🙂
It’s definitely worth checking out the shorter term markets on Ratesetter by the sounds of it!
Cheers
Hey TFS.
As far as I can gather from TSB’s T’s and C’s, you can have one sole account each (already got those) and one joint account (work in progress). How did you manage to get 4?
As far as the ‘manly option’ goes, my tongue-in-cheekness obviously didn’t come off very well there. There’s no way in hell that, even with a 9-5, you’d ever catch us in a position where we were relying on the next salary payment. I don’t know about you, but that was true even before I became interested in FI.
Yeah, I’m starting to think along the lines of £6k (or £8k) in TSB plus, £12k in whatever the best buy fixed rate ISA is (we’ve currently got that in a Coventry BS 3 year fix which finishes next year at 2.75% – no chance of getting that again) and then the £10k+ we need to stay at 1 year’s living expenses in something like RateSetter short-term markets.
More research required I think!
As a matter of interest, we keep > £30k in available credit card limits hanging around too. Of course I’d never rely on them being there but there would have to be a disaster of epic proportions to completely wipe out our entire net worth and nobble all of the borrowing options at the same time. In that sort of situation, I don’t think I’d be worrying about money!
Not sure what to tell you, I just set up another account for both of us and it let me do it. Maybe a glitch in the system or something!?
It’s not like they don’t know they are both in our names because they both show up under one login. Weird.
@FS – how have you reached the conclusion that ratesetter folding is extremely remote. Can you quantify that in anyway? I’m genuinely interested to know. Many other P2P platforms have folded.
@LL you could look at:
http://www.nationwide.co.uk/products/savings/smart-limited-access/features-and-benefits
for a home for your cash as you have kids. This would provide 2.25% on up to £50k per child
Technically you’ll have to pay your marginal rate of income tax after the 1st £200 of interest – but with the new allowances that may still get you a long way.
Its what I’m doing for a chunk of cash
Thanks TR – I’ll definitely look into that. Good spot!
Hi The Rhino,
I’ve not gone over the company accounts if that’s what you mean 🙂
And obviously I haven’t got a crystal ball either. I guess I’m just going by the fact that they’ve gone through the hardest years of starting up a business without folding, they have a large provision fund, and are clearly one of the top P2P platforms in the UK right now.
Thanks for the heads up on Nationwide, definitely worth a look at!
I love this!
I’ve been researching P2P for around 4 years now, since it was really, really new and still super scary and still no money has been invested. Thank you so much for sharing this, I’ll be setting this account up tonight!
Great Cora
I was pretty much the same, finally bit the bullet due to the good opening account offer!
Cheers!
I put my £1000 in Ratesetter in April after Monevator mentioned the joining bonus, but I’ve not added to it, as its rather dull.
I’ve put a lot more into Funding Circle, partly because of its better rates (at higher risk, but my defaults are much less than predicted), but also because I can play at picking winners. My long term goal is to have 5% of my net worth in p2p, and Ratesetter deserves more, but I can’t get excited about it.
Hi John,
Have to admit, I will probably only leave that £1000 in there as well. I want to check out the other P2P and obviously diversification across these types of things is probably wise in case any one of them does end up going down the pan.
Yea that’s the whole active vs passive thing isn’t it? I liked Ratesetter as my first foray into P2P because of that simplicity. I will have a crack at Funding Circle when I get some more spare funds that aren’t being diverted elsewhere.
5% sounds like the right sort of amount for me as well, which would put me at only around the £5K mark, so definitely scope for me to open up a few more accounts.
Hello TFS,
I’ve just sold out a lot of my P2P lending as I was concerned I was over exposed. I had around 10% of my portfolio in p2p, spread over 5 platforms (SavingStream, Funding Circle, LendingWorks, Wellesely and RateSetter).
After my re-adjustment I should be down to around 6%, which feels much more comfortable. Of that 6% Ratesetter accounts for around half the total value. If you’re looking for a more active platform then saving stream has plenty to get your teeth into and offers 12% returns, but with a much higher risk.
TBH my portfolio is too heavily skewed towards property (around 30%) (we have two BTL’s), but this is an area where Mrs Bob has some faith and experience. We also keep too much as cash (around 30%), but that comes from our risk averse nature.
My main hurdle to get over in achieving FI is getting the expenditure under control. This is not helped by having too many children.
Hi Bob,
Thanks for chipping in with your experience. I agree 10% sounds a bit too high!
I’ll check out Saving Stream once I’ve gone through Funding Circle which is the next P2P I was going to look at, thanks for the heads up on that one.
Too many children! Having only one little one so far I can’t really help you there but if any readers out there have advice please let us all know 🙂
Hey TFS, just dropping a line here as the referral rate is now £50 if you follow the link – noting this is on one of you sidebars on your main page too.
The Doffer
Hi The Doffer, thanks for letting me know, I’ll change the text now!