Review of Ratesetter

Written by Demetrius Vouyiouklis

I have been investing with Ratesetter for a total time of about 2 years. I cancelled my subscription with them about 3 months ago, then re-subscribed 2 months ago, for reasons that will be explained later in the article.

During that 2 year period, my average investment has been approximately £13,000 and my average rate of interest received has been approximately 4.2%.

I initially looked at peer to peer lending when some reasonably yielding (i.e. above RPI inflation) invested capital investments were coming their end, in order to avoid the low interest then (and presently) paid by banks/building societies.

As peer to peer lending is not protected by the (currently) up to £85,000 ceiling set by the Financial Services Compensation Scheme (FSCS), I kept my investment in Ratesetter at a low-ish level, despite their tempting rates of return.

I was able to take advantage of a £50 introductory bonus, both to me and the person who introduced me to the scheme. The sign up bonus has now been increased to £100, but you need to invest at last £5,000 for at least one year in any of Ratesetter’s markets.

I made my initial investment and watched this sum for a few weeks. I then trickle-fed my own money into Ratesetter, up to about £2,000 and eventually gradually increased this amount as other, reasonably-yielding investments came to their end.

Once the money goes into Ratesetter from one’s bank or other account, it is kept un-invested until the person decides how to place it. Money paid back from Ratesetter also goes into this pot, until the decision to re-invest or withdraw it.

Once my account had been set up, money from my bank (Halifax) moved into and out of Ratesetter at a good speed.

I tried all three of the Ratesetter investment types, Rolling, Annual and 5-Year and here are my experiences.

Rolling: the money was invested for periods of about 1 month. The Rolling rate was usually slightly lower than the Annual rate and the money could be withdrawn penalty-free during the period of investment (provided the platform permitted it, on the basis of availability of other investors to pick up the remainder of the loan). I looked at potentially doing this several times, it was always possible to do so, but only actually did it once, in order to increase my lending rate from 3.6 to 4.5%.

My Annual investment was in order to not have to think of re-investing every month, plus get a slightly higher rate of interest than the Rolling type of investing. I was slightly taken aback when, after only about 7 months, my annually lent money was repaid early and I had to re-invest it. I decided to re-invest for another year, however, the new rate was slightly lower.

My 5-Year investment was not as I expected it, i.e. my money was not tied up at the agreed rate of interest, to be repaid in total after 5 years. Instead, I received a monthly set amount return, consisting of a mix of capital and interest. Overall, it seemed like I was actually investing half the money for 5 years, with the added complication of having to re-invest the yield+capital returned to me every month. In retrospect, this would have been a good way to invest for set income only.

After about 18months of investing with Ratesetter, I received an email from them explaining that I could withdraw all my money (provided there were investors willing to pick up my investments) and close my account with them fee-free, as there had been some historic questionable loans made by the company in which I had not participated.

Despite this, according to Ratesetter, no investor lost money. At that time, I felt that I had lost some confidence in the platform and would be happier to have my money back fee free, which I received approximately 6-8 weeks after the initial email.

I then followed the Ratesetter story in the media, and eventually opened a new account with them, as I felt that, under the circumstances, their new management had done the decent thing, changed their strategy for the better and were in fact still trading.

Their rates have since gone up and I currently have approximately £8,000 invested in their Rolling account.

I like to think that, Ratesetter’s new approach since they came clean, may have made them a better company, hopefully marginally safer than another similar company, which may have some hidden skeletons.