A more predictable Market Rate

By Mario Lupori

 

At RateSetter, the rates in our markets are continuously updating based on investor supply and borrower demand.

A particularly attractive feature of investing with RateSetter is the track record of stable and steady average returns over time. This contrasts with the volatility of other investment asset classes such as equities. During 2018, RateSetter investors enjoyed average annualised returns of 4.83%, whereas the FTSE 100 fell by 12.5% (read more about this in our recent blog).

Against this backdrop we want to increase the consistency of investor returns further with an adjustment to the way the Market Rate is calculated.

Currently, the daily Market Rate is calculated by taking the weighted average of all the rates transacted during the previous day. This has the benefit of making the Market Rate dynamic, but it has the downside of fluctuations which can be frustrating for investors. As an example, the Market Rate of the Rolling market ranged between 1.9% and 4.1% in January 2019, with a similar range experienced in previous months too (the full timeline can be seen in the rate trends graph on the Data Hub page).

We are therefore planning to update the way the Market Rate is calculated to include the weighted average of all the rates transacted during the previous 28 days. With this change in place the average Market Rates in January 2019 would have been as follows:

 

January 2019

Actual Market Rate range (using 1-day average)

Market Rate range using 28-day average

Rolling

Min: 1.9

Max: 4.1

Min: 2.8

Max: 3.4

1 Year

Min: 3.1

Max: 5.1

Min: 4.0

Max: 4.7

5 Year

Min: 5.7

Max: 6.3

Min: 5.7

Max: 6.0 

 

This update will mean greater consistency in returns for investors while preserving the flexibility that makes investing with RateSetter so attractive. It will also allow RateSetter to plan ahead and lend with greater certainty and confidence to generate more investment opportunities for investors.

You do not need to take any action and this will not affect your reinvestment settings. We wanted to notify you in advance of this new approach to calculating the Market Rate, which will be reflected in an update to the Investor Terms and will come into effect in March.

 

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