The way bidding works at p2p lending service Ratesetter will change on June 24th. Ratesetter informed investors
Currently your money is re-invested at the higher of â€œYour Rateâ€ (i.e. the rate you have specified) or â€œMarket Rateâ€ (i.e. the rate that is worked out daily at RateSetter looking at the whole market). Once re-set to Market Rate it stays at that rate which resulted in some scenarios where your money could be sitting at Market Rate unmatched when in actual fact your specified rate was lower.
From 24th June, your money will simply be put on the market to be re-invested at your specified rate. Simple as that.
It is worth saying that if the highest borrower bid at the time of your re-investment is higher than your specified rate, your money will be matched at that rate.
So, we hope that you can now use the â€œYour Rateâ€ functionality to better control the rate at which you re-invest. One way of looking at it is that is like a floor â€“ you will get at least your rate, or the best borrower bid if that is higher.
There has been some discussion among investors what this means and what actually changes for investors. The way I interpret it (but I am not even a Ratesetter investor) is that the market rate will become less important as Ratesetter could advice the borrower at what rate his loan request would match instantly. Since many investors will not micro-manage their set rate and only login occasionally it will lead to a broader distribution of interest rates set as ‘Your Rate’ and thereby reduce volatility. E.g. should interest rates move upward on the market (for whatever reason), unchanged ‘Your Rates’ at lower levels from earlier times will delay and slow the rise (provided they have unused cash from repayments in their accounts).
But let’s hear opinion of actual Ratesetter investors in the comments, please!