Simplifying early access to invested money

By Luke O'Mahony

We understand that as a lender, your plans can change and this may mean you need to access the money you have invested with RateSetter early. Indeed, £240 million has been accessed via our secondary market to date using the sell out function.

On 2 November 2017 we are introducing improvements to the way you access your money and we are notifying all lenders in advance of those changes.  We are simplifying the current two fees for this service down to a single and clear Transfer Fee for each market (see table below).  We continue to emphasise that access is subject to the availability of other funds in the market to replace any money being withdrawn.

RateSetter lenders can access their money as borrowers repay capital and interest in line with their agreed schedule. However, sometimes a lender’s plans can change and they need to obtain access to money matched to loans early.  Recognising this, our long-standing principle is that a lender can exit from any market, provided other funds are available to take their place on the loan contracts.  This is a principle that we will continue to apply.

We are simplifying early withdrawal fees from 2 November 2017 by introducing a straightforward, single fee to transfer your loans to another lender.  The Transfer Fee will be fixed for each market and will be a percentage of the capital being withdrawn (note that the fee will apply only to capital requested to be withdrawn, not interest).  The Transfer Fee, which is shown in the table below, will be lower than the average fees incurred through sell out.

Market

Average Historic sell out Fees

(% of capital being withdrawn)

Transfer Fee

(% of capital being withdrawn)

Rolling

0.02

0.0

1 year

0.31

0.3

3 year

1.12

1

5 year

1.9

1.5

We will continue to calculate and display fees before a lender confirms they would like to proceed with their transfer request.  The minimum amount that can be transferred out will remain at £10.

To date, £240 million has been accessed early, showing that our markets have consistently been deep and liquid.  However, we always like to be clear that early access to invested funds is subject to other funds being available to take their place on contracts, and this will remain the case after 2 November 2017.

We are also changing the terminology on our website relating to access to money as follows:

Current terminology

Action

New Terminology

Deposit

Add money to your RateSetter holding account

Money In

Withdraw

Take money out of your RateSetter holding account and send to your bank account

Money Out

Sell out

Request early access to money that is currently matched to loan contracts

Release Your Investment

At the same time, we will remove the ‘Drawdown’ function. Less than 2% of lenders use this function which moves a designated amount of money back into their holding account as loan repayments are received, leaving the remainder to be reinvested.  We will retain the Auto Withdrawal function which allows funds to be transferred from a lenders’ holding account to their bank account on a regular basis.

We are amending the Lender Terms to reflect these changes, and are giving lenders one month’s notice that the new Terms will come into effect on 2 November 2017.  A copy of the new Lender Terms can be seen here (we are also publishing a summary of changes to Lender Terms listing any changes made since October 2015, which can be viewed here). We will provide one calendar month’s notice to lenders if we make any changes to the Transfer Fee in future.