Ratesetter Review – My Lender Experiences After 5+ Years

ratesetter review

Ratesetter Review (UK)

** Ratesetter review updated October 21st, 2020 **

— Covid-19 Update: Ratesetter is currently closed to new investors but current investors can lend as normal. Metro Bank has acquired Ratesetter —

Read my comprehensive unbiased Ratesetter review highlighting my investing experiences after 5+ years as a lender. Many things have changed at Ratesetter in 2020 including the Metro Bank purchase and interest rate return cuts due to economic conditions caused by the Covid-19 pandemic. I expect these return rates to remain low into the end of 2020.

Established in October 2010, I considered Ratesetter to be one of the safer peer to peer lending companies offering great exit options and liquidity. Now the rates have been cut, I think the risk has been increased from an investor perspective. In other words, the returns offered don’t always justify the risk taken.

Ratesetter’s products are designed to simplify their product offerings. The offered Covid-19 return rates are now an all-time low 2% for the Access, 2.33% for the Plus and 2.67% for the Max accounts. The investment options are still basic and easy to understand.

In September 2020, the Metro Bank sale was completed It is unclear how this acquisition will affect retail peer to peer lenders although Metro Bank has stated it will use its deposit base to fund new unsecured Ratesetter loans. I believe Ratesetter will eventually phase out its retail peer to peer lending business and solely funds unsecured using Metro’s customer deposit base.

Read on for more information.

My Current Investment Amount: Click here
My annual rate of return: 4.7% (After fees but before taxes)
Est. Annual Returns:Up to 2.67%
My Risk Rating *:
Early Exit:
Provision Fund:
ISA Available:
Loan Types:Consumer, property, business
Loan Security:Consumer loans unsecured, property, asset-backed
Lender Fees:1.5%, 1%, 0.3% exit fee (5, 3, 1 yr)
Min Investment:£10
Time to Become Invested:Auto-invest is Instant, manual varies on rates
Time Needed Managing:
Lending Agreements With:Borrowers
FCA Regulation:Full
Cashback Offer:
NC - £100 bonus on £1,000 investment (see terms)
Sign Up:Sign Up

* This opinion risk factors in loan types, interest returns, company history, default numbers and my own investing experience. Risk rating explained here.

How Do I Sign Up /  Any Bonuses?

— Covid-19 Update: Ratesetter is currently closed to new investors for current investors can lend as normal —

Click here to sign up and receive a £100 bonus on a £1,000 investment into an ISA or regular account(New customers only. See terms on sign up page. Offer can end anytime. See terms and conditions on the signup page. When you open an account through my website it helps me to continue to operate and offer reviews).

The Ratesetter Review: What You Need To Know

Thumbs Up
  • Established in 2010 / £4bn+ lent
  • Liquidity for exiting loans (pre Coronavirus)
  • Purchased by Metro Bank giving financial security
  • Loans given to creditworthy, lower risk borrowers / Lower default rates
  • Provision fund with interest buffer to cover lenders equally
  • ISA available
  • Easy to use
  • Brismo certified
Thumbs Down
  • Return rates at lowest levels
  • Access Market starting Fair Usage Rule (14 day reinvestment restriction)
  • Peer to peer lenders will now only fund secured loans
  • Loans of £10 and under can be sold
  • Retail peer to peer lending loan book will decrease and cash drag could be an issue
  • Exit fees on 3, 5 year, Plus and Max products (there’s a hack to bypass fees)
  • Auto-invest transactions don’t show you the rate your money was loaned at
  • Early loan repayments can leave large uninvested sums in your account if you manual invest
  • Idle money leads to lower returns
  • Larger lump sums of your money can be invested into single loans
  • Company operating at a loss (losses down from £27.5m in 2018 to £4.2m in 2019)

Read more below in my exclusive Ratesetter review.

Coronavirus Update

Due to the Coronavirus crisis, Ratesetter has experienced a slowdown in liquidity resulting in slower exit times. Ratesetter reports they have processed £4.3m of exit requests in one week but have seen a large drop in exit requests to pre-Coronavirus levels demonstrating customer confidence. I was able to exit from the 5 year product within six weeks but I requested an exit from my Access account on March 13th, 2020 and I am still in the queue. I will explain why later in the review.

On May 4th, 2020 Ratesetter announced a dramatic temporary decrease in investor return rates:

Ratesetter review

This decrease is to divert money into the Provision Fund which covers all investors equally in case of borrower late payments or defaults. I expect this reduction to be a temporary measure.

* Exiting peer to peer lending investments is never guaranteed as liquidity changes during the varying market and economic conditions.

Metro Bank Purchase

In September 2020, Metro Bank completed the purchase of Ratesetter UK for between £2.5m and £12.5m depending on performance and pending regulatory approval.

What Does The Metro Bank Acquisition Mean For Lenders?

What we know so far is that Metro Bank will use its customer cash deposits to fund new Ratesetter unsecured loans while retail peer to peer lenders will continue to be serviced as normal.

Will Retail Peer To Peer Lenders Still Be Able To Invest Through Ratesetter?

Retail peer to peer lenders (use and I) will no longer invested into secured loans. Metro Bank will fund those loans using its customers’ deposits.

In Ratesetters press release, they state that “Going forward, all new unsecured personal loans originated by RateSetter will be funded by Metro Bank, in line with Metro Bank’s stated strategy to grow in this area.  RateSetter investors will continue to fund the ongoing essential secured residential property development, dealer finance, family finance and giffgaff lending.  Apart from the remaining essential lending, the investor portfolio will go into run-off.  This means the investor loan portfolio will decrease in size over time but our focus on investment performance will remain throughout”.

This statement means that depending on how many secured loans Ratesetter continues to underwrite will depending on how much loan availability will be offered to retail investors. What I see happening is that Ratesetter will phase out its retail peer to peer lending and become a vehicle for Metro Bank to solely focus on unsecured lending. This is why Metro Bank purchased Ratesetter.

For now, things remain as is but don’t be surprised to see your money being lent out more slowly as unsecured lending is funded by Metro Bank’s large cash pool.

What About My Existing Investments?

Nothing will change for now, your loans will remain in place and you will continue to receive capital and interest payments as the loans are repaid. The 5-year product is being discontinued though so if you have money invested in that product, you will need to make a decision. More on that in this review.

5 Year Account Closure

I will discuss this later in the review in the product section and give my opinions on what to do with your existing investments

Equivalent Competitors

Loanpad, Lending Works, Zopa

Ratesetter’s Company Financials

Ratesetter made a post-tax loss of £4.2m for the year ending March 31st, 2019. Company accounts can be seen here.

Ratesetter Review: My experiences so far

I have been investing in Ratesetter’s loans since early 2015. I have a special love for Ratesetter as it took my peer to peer lending virginity without buying me dinner. Ratesetter was the perfect entry point into peer to peer lending as it provided simplicity, relative safety (for peer to peer lending), a provision fund and a possible exit strategy. The December 2019 and July 2020 rate cuts made Ratesetter far less attractive.

The highest return I see investors obtaining post-Covid is 4% not including the 1.5% early exit fee on accounts aside from the Access account.

One consideration is if you are a new customer you can take advantage of any cashback offer to boost your one-year return rate using the Access account then rethink further reinvestment. Promotional offers have been paused due to Covid-19.

I switched my strategy from manual lending in early 2019 to using the auto-invest feature simply because I don’t have the time to monitor my account daily. My returns fell slightly but it was worth the time saved. Incidentally, Ratesetter told me only 7% of all investors set their own rates. I was surprised by this low number.

The Access, Plus and Max products were introduced on October 3rd 2019. What do I think of these products? I was fine with them until the rates were cut down to 2% per year which is below what I’m willing to accept for a longer-term investment. I decided to let my loans mature and withdraw funds as they are repaid. I’ll re-evaluate if rates increase.

You can read more about the product offerings below.

What Is Ratesetter?

Ratesetter is a UK based peer to peer lending company where lenders loan money directly to borrowers via lending terms of either instant access (Access rate), one year or up to five years. The Access account invests in a mix of one-year and five-year loans.

Most borrowing types are unsecured personal and asset-backed property loans. Property loans make up a small percentage of loans so it’s important to know most loans are unsecured.

Lenders can either choose the current market return rates or set their own return rates.

Even though you may actually be lending to a few borrowers, diversification is achieved by all lenders sharing in bad debts equally.

Ratesetter announced changes to its Access Account (read more in my “Thumbs Downs” section below) and then reversed the decision to disallow lenders to be able to set their own targeted interest rates on reinvestment funds. Lenders were once again able to set their own rates from September 5th, 2018.

I would like to see Ratesetter operating as a profitable company. It has posted losses for 2019.

Ratesetter has excellent online reviews from borrowers which means Ratesetter cares about taking good care of its customers.

In September 2020, Ratesetter announced it had been purchased by Metro Bank.

How Can I Contact Ratesetter?

UK Tel: 0203 1426226

When Did Ratesetter Launch?

October 2010

Is Ratesetter Regulated?

Yes, by the Financial Conduct Authority #722768 under full permissions granted October 16th, 2017. Investments made through Ratesetter are not covered under the FSCS (Financial Services Compensation Scheme).

FCA regulation is nothing like the FSCS, which covers consumers when they deposit money in banks. The FCA reports to the UK government and has the ability to pursue criminal action against companies which violate its standards and codes of conduct.

Who Can Open An Account?

Any person 18 years or older who has a UK bank account and can pass the verification check. Currently Ratesetter isn’t accepting new customers due to economic conditions caused by Covid-19.

What’s The Signup Process Like?

Simple. They run the usual i.d. checks.

What’s The Minimum Deposit / Investment?

Debit card deposit: £10 min
Bank transfer deposit: No min
Investment into loans: £10 minimum

How Are Deposits Made?

Via bank transfer

Does Ratesetter Offer An Innovative Finance ISA?

Ratesetter’s IFISA was released late February 2018 and is available to all lenders.

How Much Interest Are Lenders’ Paid?

Average market rates are as follows:

Legacy Products

Access / Access: Ranges from 2.5% to 4% with a historical average of 3.1%
1 Year: Ranges from 3.7% to 5% with a historical average of 3.7%
5 Year: Ranges from 5.1% to 6.4% with a historical average of 5.8%

Current Products Under Normal Market Conditions:

Access: 3%
Plus: 3.5%
Max: 4%

Temporary Covid-19 Conditions:

Ratesetter review

With the new products using autoinvest, you can expect to receive the rates listed above but don’t forget about the exit fees on the Plus and Max products.

I’ve tried manual rate setting and I no longer think manual rate setting will be rewarded with any long-term rate rewards or benefits.

If you manually set your target interest rates too high, you’ll have idle money sitting waiting to be lent earning you no interest. Idle money collecting little or no interest can have a detrimental effect on returns. I would estimate that due to idle money time, you will receive about 0.25% less than advertised rates so either use the auto-invest or monitor your account often.

What Products Do Ratesetter Offer?

Current products

On October 3rd, 2019, Ratesetter rolled out three new products called Access (previously known as Rolling), Plus (previously known as one year) and Max (previously known as five year).

During my September 2019 visit to Ratesetter, ex-Chief Investment Officer Mario Lupori and Head of Communications, John Battersby explained that Ratesetter’s new products are designed to provide stability and liquidity in the event of a change in the economic landscape. The new products are also expected to deliver more consistent returns for lenders.

The main difference with the new products is that liquidity will be pooled together across three markets versus individually. For example, if your money is currently invested through the one-year market and you want to exit, you can only exit based on the liquidity of the one-year market. With the new products, exiting the Plus market would be easier since money could come from wherever it was available across all three markets.

I believe liquidity is becoming increasingly important within the peer to peer lending industry.

Here is a comparison of the old products versus the new:

ratesetter review

And the standard market condition “Going Rates” and exit fees:

Ratesetter review

So what are these “Going Rates”? The new products have a market rate based on demand and supply versus the existing trailing average rate. Ratesetter will provide a 14-day notice should they decide to change the Going Rates but say it’s unlikely these rates would be changing often.

Ratesetter claims the Going Rates allow them to remain competitive in the low-risk lending sector and that the rates will be more stable than the existing trailing average rates. Lenders will still be able to manually set their own rates under the new products.

One gripe about the new products is the reinvestment process. It’s fine for the Access account which has zero exit fees but for those invested in the Plus and Max products, you will be automatically reinvested in the same product and forced to pay fees to exit, even if you want to switch products.

There’s technically no option to have Plus & Max repayments funnelled into your holding account but fear not as there is a workaround. You can manually set reinvestment rates much higher than the Going Rate to prevent money from being reinvested and then you can cancel the order which would return funds to your Holding Account. This isn’t an advertised workaround but one that exists nonetheless.

Here’s a video showing how you can avoid Ratesetter’s exit fees

The lack of repayment options will affect people who want to withdraw income payments. Ratesetter said this is challenging since capital repayments aren’t consistent and that they are looking into this in an effort to create a balanced income withdrawal feature but now Metro Bank has purchased Ratesetter, I doubt we will see any changes here.

I’m noticing that there is very little money higher than 4% but plenty of investors with high hopes of achieving 4.8%+ in the five-year legacy product rates:

Ratesetter review

Lower rates are the new norm and investors will be forced to accept lower rates than the new Max product offers or switch to the Max product which has an exit fee.

Return rates have fallen further due to Covid-19 but I expect this rate reduction to be temporary.

Legacy products

Access: This account was designed to be an easy access account and pre-Covid accessing money was fast, but due to Covid, exiting has been reduced to months of waiting. Access always depends on demand and supply and is never guaranteed.

This account funds many different types of loans including consumer, business and property. There is no exit fee. This product was renamed Access on October 3rd, 2019.

One Year: The one year account only funds property loans. You can exit early for a fee if availability exists. New investors will not be able to lend money through the one-year market but rather through the Plus product which is the one-year equivalent.

Five Year: The five-year account funds many different types of loans including consumer, business and property, you can exit early for a fee. Currently exiting is faster than the exit account but is still taking a long time. New investors will not be able to lend money through the five-year market but rather through the Max product.

How Are The Current Access Rates Determined?

Access rates are calculated by taking the weighted average of a 28 day period.

Is Interest Paid Immediately Or When the Loan Starts?

Interest accrues as soon as your money is matched to a loan.

When Is Interest Paid?

Access, Plus & Max: Capital and interest are paid monthly or when you sell out / withdraw.
1 Year: Capital and interest are paid at the end of the term.
5 year: Capital and interest are paid monthly.

Am I Lending To Ratesetter Or The Borrower?

Ratesetter is a true peer to peer lending company so you’re loaning money directly to borrowers. This is good for lenders.

What Are The Fees?

Ratesetter charges an exit fee on their 1, 3, 5 year, Plus and Max products. The fees are as follows:

Access: No fee
1 year: 0.3%
3 year: 1% (for those invested in the now-defunct 3 yr product)
5 year: 1.5%
Plus: 30 days interest based on Going Rate at the time of investment release
Max: 90 days interest based on Going Rate at the time of investment release

If you want to estimate the fees, do the following:

Step 1: Click on the Withdraw link inside your account:

Ratesetter review

Step 2: Click on Sellout at the bottom of the screen:

Ratesetter reviewStep 3: Enter the desired sellout amount and the fees will be shown:

Ratesetter review

You can see from my example that the exit fees are 1.50% on the five-year product.

On a positive note, the Access account has no exit fee.

One important note is you cannot sell loans of £10 or less. I cover this more in my Thumbs Down section below.

If you are investing in Ratesetter with a plan on exiting early, depending on the rates, you might consider using the short term Access account due to the costly exit fees on the five-year products. Just remember that exiting from the Access account depends on demand and supply and can take months.

How Much Time Will I Need To Spend Managing My Investments?

I used to spend approximately 30 minutes per week using Ratesetter. To earn the best rates, I had to log on and make sure my reinvestment target rate settings were realistic otherwise money idly sat by in my Holding Account earning zero interest.

I’m now using Ratesetter’s auto-invest to free up some time so I spend almost no time managing my account.

Interestingly, Ratesetter informed me only 7% of lenders use manual rate setting.

The Fee Avoiding Hack

Ratesetter charges fees to release funds from its Plus, Max, 3 and 5 Year products. Also, funds in these accounts are automatically invested, forcing you to pay an exit fee. Lucky for you, there is a way to avoid these pesky fees.

By setting your own rates to the maximum allowed (show below), your repaid capital and interest will sit as unmatched orders, then you can simply cancel your orders. Once you cancel your orders, the money will show up in your holding account where it can be withdrawn.

This hack won’t give you access to all your money but it will allow you to prevent money being re-lent which you can then withdraw free of charge.

You can watch my video tutorial on how to do this here

How Do I Set My Own Rates?

The manual rate-setting offered is really hard to find. Here’s how:

Ratesetter review

Click the small pencil on the right-hand side to manually set your rates.

Ratesetter review

How To Cancel Or Edit Unmatched Money Orders

I’ve found this feature to be very hidden so if you have money that is unmatched and you want to cancel or edit the orders, here’s how:

1. On your main dashboard scroll down to your portfolio section and click the hard to see pencil icon:

Ratesetter review

..from here you can select your unmatched orders and cancel or edit them:

Ratesetter review
How Long Are The Loan Investment Terms?

Access (easy access/ no minimum time frame), one year or five years. The Access account invests your money across loans ranging from six months to five years. Any loan can be repaid early by the borrower. This has been frequently occurring since interest rates have dropped as borrowers are refinancing their loans or looking elsewhere for lower rates.

What Security Does Ratesetter Lend Against?

Ratesetter lists its borrowers’ types as individuals, business / commercial loans, and property. Although it doesn’t specifically list each loan, Ratesetter states “Commercial loans include unsecured loans to sole traders and small businesses and secured loans to larger businesses.” All business and property loans are secured by an asset while personal loans are unsecured.

What Are The Loan Loss Rates?

Loss rates on the Provision Fund covered loans are:

2020: 0.5% (year-to-date)
2019: 2.2%
2018: 4.5%
2017: 3.3%

You can view Ratesetter’s current statistics here.

What Are The Main Risks?

Company Failure: This is a risk with every peer to peer lending company. If the business model fails, investors could lose all of their investments though it’s more likely they would lose some of their investment. I considered Ratesetter one of the safer peer to peer lending companies however Covid-19 has changed this. Ratesetter’s provision fund does protect the company somewhat and its pending aquisition by Metro Bank may provide added financial stability.

Economic downturn: Ratesetter is now experiencing a  downturn in the economy caused by the Covid-19 pandemic. Ratesetter might experience higher borrower default rates since most loans are unsecured. Ratesetter states it is positioned to handle such a downturn.

Lowering of underwriting quality: One of Ratesetter’s draws is they lend to high-quality borrowers who they consider low risk. There is always a risk that Ratesetter will lower their underwriting standards to attract new borrowers resulting in higher defaults.

Is There A Provision Fund And How Does It Operate?

Approximate Provision Fund balance (September 2020):

Interest Coverage Ratio (money to ensure all investors are paid all expected interest owed):

Cash: £6.2m
Expected Future Inflow Cash: £17.4m

Capital Coverage Ratio (money to ensure all investors are paid all expected capital owed):

Buffer: £23.7m
Expected future Investor Interest: £30.2m

You can view the latest Provision Fund numbers here.

Ratesetter has made some extensive changes to its terms and conditions in regards to how their Provision Fund operates. Ratesetter is now allowed to manage the Provision Fund’s health and size by reducing costs, using future loan funds and interest or reducing lenders interest returns.

You can see an example of these Provision Fund changes during Covid-19 where investor rates were decreased in order to pad the fund.

These changes are designed to keep the fund replenished in times of financial troubles. Some people were understandably unsettled by these changes but I appreciate Ratesetter’s forward-thinking to protect lenders’ interests.

Ratesetter’s Provision Fund neutralises individual loan risk meaning it doesn’t matter what types of loans investors are lending to as the Provision Fund covers all losses equally.

What Happens If Ratesetter Goes Bust?

RateSetter’s acquisition by Metro Bank in September 2020 should decrease Ratesetter’s chances of insolvency but there is always a chance Metro Bank could go out of business. Ratesetter is required by the FCA (Financial Conduct Authority) to have a sufficient wind-down plan in place. If Ratesetter were to go out of business, an independent trustee would be put in place to ensure lenders loans are handled correctly and to ensure the wind-down of the company. Since lenders and borrowers are contracted between each other, borrowers would continue (in theory) to make payments to lenders via the trustee.

The biggest issue with company failure is that the expense of trustee and administration will significantly reduce the amount of recovered money paid to lenders.

An administration company would work on behalf of the creditors (people owed money) and customers (borrowers) to recover as much money as possible. It’s important to know that we (lenders) are not considered creditors.

While there is always a chance any company can go out of business, I hope Ratesetter is a robust company that will stand the test of time, especially during the Covid-19 pandemic. As with any investment, be aware that your capital is at risk.


Safety + Provision Fund + Metro Bank

Under normal market conditions, Ratesetter was considered to be one of the safer peer to peer lending companies. Ratesetter claims they only loan money to high-quality and lower risk borrowers but this is hard to verify as a lender because very little information is provided regarding individual loans. The Provision Fund while not guaranteed, provides an extra layer of safety and is in place to pay lenders in the event of loan defaults or economic downturns.

The Covid-19 pandemic increases investor risk so be aware of this.

But now Metro Bank owns Ratesetter, investors should fee much better as Ratesetter now has institutional funding for its loans.

The Provision Fund covers all investors equally so you don’t have to worry about which individual loans you are invested in.

Ratesetter is an FCA regulated, well-funded company with a multi-billion pound lending history dating back to 2010. Many lenders discount the importance of a company being operated correctly and having access to growth funding.

Provision Funds have their supporters and opposers. Supporters feel safer while opposers think funds reduce lenders’ returns rates. I think both sides have valid points but I like the added protection Ratesetter’s Provision Fund offers.

While I believe Ratesetter’s business model is steady, I do think that the lower returns being offered increase the risk to investors.

Low Default Rates / No Lender Has Lost Money

Loss rates remain low and Ratesetter reports that no lender has ever lost money through Ratesetter.

Exit Liquidity

During Covid-19 Ratesetter’s liquidity, as expected, has greatly reduced but Ratesetter still gives you exiting possibilities. Liquidity is only as good as demand and supply permits. If there are no buyers for your loans, you won’t be able to exit. As investor fears have increased, less are willing to buy loans.

Pre-Covid-19, Ratesetter experienced good liquidity for loan exits. You selected how much you wanted to sell and Ratesetter showed you how much your exit value was minus fees. Under normal conditions, exit fees are vary depending on the products you are invested through (see fees section above).

The Access, Plus and Max products are normally designed to offer even greater liquidity as selling comes from all three markets rather than the individual markets you are invested through.

Remember that being able to liquidate existing loans isn’t guaranteed and is demand and supply dependant.

Ratesetter offers queue information so you can see how many exit positions are in front of your exit request:

Ratesetter review

Deposits, Payments & Withdrawals

Use a debit card for instant deposits. Monthly payments have always been on time and withdrawals can be as fast as the same business day.

The Website

It’s very easy to use and looks great. Here is the Portfolio dashboard:

Ratesetter reviewTIP: Here is how you can quickly access the page that allows you to set your own interest rates.

Most pages display the current Going Rate box. You can click on the rate term you want to invest in:

ratesetter review

You will be taken directly to the investing page where you can set your own rate:

Ratesetter review

The tricky to find edit pencil icon button is where you will find the manual rate setting. From there you can set your rates:

Ratesetter review



Low Return Rates

Since the introduction of the new Plus and Max products, lender return rates have fallen severely. I can’t justify lending long-term at 4% while the free Access account pays 3%. so I’ll be pausing any long-term reinvesting unless rates improve.

Rates have fallen to an all-time low of a maximum of 2% annually due to Covid-19. This reduction in rates is reported to be a temporary measure designed to add more money to the Provision Fund which covers all investors against borrower late payments and defaults.

You Cannot Sell Loans of £10 Or Less!

Big thanks to Financial Thing reader Mike Taylor for pointing out this pesky Ratesetter rule which may stop you from being able to exit.

Deep inside Ratesetter’s Investor Terms is this little gem:

Ratesetter review

When Mike emailed me about this £10 selling minimum, I didn’t believe it. I had just liquidated a good portion of my loan portfolio in my 5-year account and thought many of my sold loans must have been £10 or less.

So I decided to look at my remaining 5-year portfolio and lo and behold, every single loan is less than £10.

Ratesetter review

I then decided to do a test sale to see if Mike was correct. Here’s is what happened:

Ratesetter review

Ratesetter review

So beware, if you have loans of £10 or less in your Ratesetter portfolio, you will not be able to sell them.

I’m surprised at this rule because never have I seen such a rule mentioned. There’s nothing to prevent an investors portfolio being filled with small £10 loans, therefore preventing that investor from having any chance to exit.

Access Markets Fair Usage Rule

If you have money invested in the Access Market and you make a withdrawal, you won’t be able to invest money in the Access Market for 14 days. This change was implemented to prevent people from withdrawing money at lower rates to immediately reinvest at better rates.

My index tracker funds use a similar rule to prevent frequent trading of the tracker which creates price volatility.

While I understand the concept behind this change, I’m not sure how much impact it will have on the stability of rates but it will certainly impact the annoyance level of lenders. This rule also defeats the purpose of the Access Access being an easy “accessible” product.

Idle Money Leads To Cash Drag

The biggest annoyance of manually investing through Ratesetter is that your unmatched funds can sit idly by earning you zero if you don’t keep a watchful eye on your account; also known as cash drag.

With the introduction of the new Plus and Max products, manual investing seems to be redundant, especially on the Legacy products because the manual rates are equal or lower than the Going Rates.

If you are still using the Legacy products and are wanting to set your own rates, remember to set your reinvestment rates otherwise your repayments and interest will be invested at Market Rate. Make sure your target rates are realistic or you will fund uninvested cash sitting unlent. When I manually invested and I thought rates were unattractive, I moved idle money to other companies such as Lending Works.

Ratesetter review

Ratesetter review

Exit Fees

If you plan on exiting from the Legacy 1 year, 5 year or the new Plus and Max products, expect to pay exit fees. There are no exit fees on the Access Market. If you do want to exit the longer-term Legacy products, the cheapest way is to let your loans mature and withdraw your capital and interest payments.

No Published Loan Book Information

Ratesetter no longer publishes information about its loan book, but as of June 2019, 74% of Ratesetter’s overall portfolio of borrowers were unsecured consumers and 18% property loans. I checked Ratesetter’s loans given over the last three months and 69% were consumer and 29% were property loans. This indicates Ratesetter is loaning more money to property secured borrowers.

Ratesetter claims to only lend to prime borrowers, but if Ratesetter decided to lower their underwriting standards, defaults could easily rise.

The rest of Ratesetter’s loan book is made up of secured business and property loans.

Larger Lump Sums Can Be Invested Into Single Loans

Large lump sum repayments can affect your overall long-term returns detrimentally. For example, let’s imagine you have a total of £2,000 invested through Ratesetter. One of your assigned loans is £1,000 paying 6%. If that loan repays after six months and rates have dropped to 5%, your overall returns will be much worse than if your £1,000 had been split into many smaller loans.

The likelihood of all the smaller loans repaying early is slim versus a single larger loan. Also when loans repay, cash drag can occur if you have to wait for favourable rates before reinvesting. It’s important to pay attention to the early repayment notification emails so you can re-lend as soon as possible otherwise the balance can idly sit in your account.

Set Your Own Rate Option Not Easy To Find

Ratesetter makes this feature difficult to access although you can directly access it by clicking on the Last Matched Rates box and looking for the pencil icon as stated earlier in this review.

When lenders use auto-lend and Market Rates, your money will generally be invested at lower interest return rates.

I’ve been opting for auto-invest and have found my return rates to be similar to when I manual lent.

No Email Notification When Monthly Payments Are Received

Small negative but an annoyance none the less. If I don’t log into my account regularly, I find funds sitting in my account doing nothing. The way around this is to look at your loan repayment dates and set yourself a reminder to log in and reinvest.

My Strategy

When I began peer to peer lending, I was extremely nervous as it was a new investing sector. Ratesetter was the first peer to peer lending site I experimented with. I started out using the monthly term (now called Access), which paid 3.5% annually, and I was ecstatic to receive my capital and interest at the end of the first month. I reinvested for the next two months, did some research on the company and spoke with the staff.

As I became increasingly more comfortable, I increased my investment and lending term lengths. I proceeded to lend using the three-year term at 5.8% and the five-year term at 6.6% per year.

I’ve sold out of most of my loan portfolio as there are better rates elsewhere. I’m also put off by the £10 minimum exit rule.

My Covid-19 plan is to reinvest my remaining capital and interest repayments into Ratestter.

Ratesetter Review Conclusion

Ratesetter has been offering peer to peer loans since 2010 so they have a great track record and great liquidity history (pre-Covid-19) for those needing to exit early (some fees may apply).

With £4bn lent, Ratesetter’s low default rates and £750m loan book made them a good peer to peer lending option since daily borrower repayments provide constant liquidity during normal economic conditions. Ratesetter states it lends to prime borrowers with a lower risk of default. Many consider Ratesetter to be boring since investment options are basic however in the investment world, boring can be good.

As a lender, expect to receive a max of about of only 4% interest per year during normal market conditions, and somewhere between 2-3% during Covid-19 conditions. Those are rate assuming you don’t try to exit by paying fees. If you do pay exit fees, your returns will be lower.

I find the £10 minimum loan exit rule disappointing and non-transparent.

Most loans are unsecured so it will be interesting how these loans perform during the Covid-19 pandemic. Ratesetter will be proactively stressed testing their loan book in order to make provisions for an economic downturn.

Ratesetter’s new products that were introduced on October 3rd, 2019 aim to stabilise return rates and provide extra liquidity by exit funds being provided by all three markets versus individual markets. So far these new products have resulted in some major rate cuts which are really disappointing. Covid-19 has made matter worse sparking further rate reductions but this is true of most peer to peer lending and alternative investments.

Metro Bank’s purchase of Ratesetter leaves many questions as to how the current peer to peer lending model will operate although investors should feel good there is an institutional Bank behind the name.

Due to Metro Bank’s Ratesetter purchase Ratesetter, I’m hoping Ratesetter can maintain its lending business during Covid-19 and that it can flourish beyond these difficult economic times. I feel Ratesetter will phase out its retail peer to peer lending business and loan money only using Metro Bank’s funds and for now, I remain minimally invested mode since better interest rates can be found elsewhere.


— Covid-19 Update: Ratesetter is currently closed to new investors for current investors can lend as normal —

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** This Ratesetter review is for information purposes only. This information is not financial advice and has been prepared without taking your objectives, financial situation or needs into account. You should consider its appropriateness for your circumstances. All investing carries risks. Opinions expressed in this review are opinions based on my own personal experiences. The FSCS does not cover peer to peer lending and your capital is at risk. Please don’t invest more than you can afford to lose. **


Overall Rating:
50 %
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I'm the author of Financial Thing and a regular peer to peer lender who was begrudgingly forced to figure out his financial life. Now I have a passion for helping others figure out what took me years to learn.


  1. Ratesetter has been pointless for me

    After a year, putting over £20,000 in and only choosing 1 yr loans at interest rates between 4.7% and 5.3% the actual experience was a waste of time. The loans simply peter out months before the full term leaving you with a tiddly bit of interest. In one year, despite having ALL my money in at 4.7% to 5.3%, my final interest total came to about 1.8%. I could have just gone to a safe bank for that.

    It’s a nonsense.

    I will be investing in stocks this year, investing less money but expecting to make far more than 1.8% !!

    • Hi Rick..it’s unfortunate your Ratesetter experience has been a little different to mine. It’s true you could stand to make better returns in the stock markets, especially long-term, but the certain volatility caused by Covid-19 highlights the risk of equity capital losses.


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