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RateSetter over the last 6 years
As RateSetter celebrates its 6th birthday this month we take a look at the company over the last years. RateSetter was by our reakoning the 8th peer-to-peer company to launch in the UK, following Zopa and Funding Circle, and has one of the most recognisable brands within the industry. RateSetter pioneered the provision fund which a larger number of P2P companies have subsequently adopted, including Zopa. RateSetter, along with Zopa and Funding Circle form part of the original "big 3" P2P companies, and was a founding member of the P2P Finance Association.
The provision fund that RateSetter pioneered was revolutionary. The fund would step in and repay the lender if - for any reason - the borrower did not repay. The fund also addressed the issue at the time where lenders could not offset bad debts against interest. The provision fund is not a guarantee and peer-to-peer lending falls outside of the Financial Services Compensation Scheme (FSCS). However, to date lenders have not lost any money lending through RateSetter. The provision fund is funded by a difference in the borrowing and lending rates. Currently the provision fund is valued at over £16million with a future income of £6million, and expected future claims of £17million. Bad debts are currently predicted to be less than 2.7% over the lifetime of a loan, which is an increase on the original estimate of less than 1.4% back in 2010.
RateSetter, to their credit, are also one of the few peer-to-peer companies that have maintained their lending model throughout their lifetime. This provides comparative data over a relatively long period of time.
RateSetter's lending rates have fallen from peak in Q1 2011 to a low in Q3 2013, and have slowly risen until Q2 2015, and are now slowly falling, but current lending rates are still competitive. The graph highlights the increasing volatility of the 3 year fixed market which is due to be retired this month. This volatility is likely to have been due to limited funds within this market as lenders migrated to the 5 year market.
RateSetter's popularity with both experienced and novice lenders has not changed over the last 6 years, and RateSetter have maintained their #3 position both in terms of loans arranged and loan book value and are currently arranging £50million of new loans per month. New lenders can still sign-up to RateSetter and earn £100 cashback when they lend £1000 or more through the P2P money cashback site.