Unbeknown to many investors in the RateSetter platform, you don’t have to accept the immediately available quoted rates. In fact, you can usually obtain an interest rate 0.1-0.4% higher than the quoted rate.
RateSetter is named as such due to investor’s ability to set the interest rates they are willing to accept. However, it’s not immediately obvious how to do this and so accepting these lower rates is a common mistake made by many when first investing on RateSetter.
Step by step guide for changing interest rates on RateSetter
When you first log into your RateSetter account, you will see the immediately available rates for the rolling market, 1 year market and 5 year market.
The 4.0% on the 1 year market is the lowest rate that anyone is currently offering. If you opt to invest at this rate, you will typically find that your money is matched to suitable borrowers within a very short period of time (perhaps minutes!).
If you click the 1 year market and then ‘Choose your amount’ you are taken to the next screen, as shown below.
If you now entered an investment value (e.g. £2,000) and clicked ‘review and continue’, your funds would likely very quickly be allocated at this lowest rate.
Instead, click the ‘here’ link alongside the text which states ‘Are you a RateSetter expert? Set your own rate’. I have circled the relevant link in the above image.
At this point, you will be taken to another page showing you the current market view.
On this page, you need to click ‘View full market’ (as circled above). This will pop up a new window which contains a full breakdown of the interest rates that investors are prepared to lend at.
This breakdown is effectively saying that there is £10,675 currently on offer by lenders at 4.0%.
In 2018, RateSetter lent over £700 million via its platform, which averages out at £1.9 million per day. As such, £10,675 is comparatively a tiny amount of money.
Looking at the market above and armed with the knowledge regarding lending volumes, you can make a personal judgement with regards to what rate to lend at. Don’t shoot too high as otherwise your funds will take a longer amount of time to be matched with borrowers and no interest income is generated on un-invested funds.
With this particular example, I would be tempted to invest at either 4.2% or 4.3%, which is 0.2 or 0.3% higher than the quoted rate.