As of 5 October 2016, RateSetter’s 3 year market will be closed to new investment.
RateSetter says that demand for its 5 year product is the primary impetus behind the planned closure. The 3 year market has become less and less popular ever since the platform introduced its 5 year offering, and now accounts for less than 5 per cent of new investments. The company says that investors have voted “with their wallets” and that they clearly prefer to lend in the 5 year market. The 5 year market currently pays a rate of 5.7% per annum, with the 3 year sitting at 4.0%.
RateSetter believes that getting rid of the 3 year market will simplify the offering for investors, who will now face a straight choice between short term (via the 1 year or rolling markets) or longer term investments.
Investors that currently hold exposure to the 3 year market needn’t worry. They will continue to earn the same rate of interest on loans as those loans are repaid. From 5 October onwards, borrower repayments from money held in the 3 year markets will be paid into investor holding accounts by default. Investors may then choose how to reinvest these funds.
This is the latest in a string of adjustments to the RateSetter model. In 2016 alone, the company has wiped away all exit fees from its monthly market, put an end to investing a portion of its provision fund via the platform itself, appointed a third-party backup servicer, and made changes to the way it calculates its provision fund coverage metric.