RateSetter reaches 3,000 lenders
Last week RateSetter reached a significant milestone: 3,000 Australian lenders having joined our platform since our launch in 2014.
This is an increase of approximately 50 per cent over the last six months, with significant growth coming from SMSF investors, retirees and pre-retirees seeking greater yield with lower relative risk.
P2P lending is already giving borrowers better features and lower rates on personal loans, introducing much-needed competition against the banks. The investment landscape is now following suit as investors become increasingly aware of consumer credit as an asset class that can offer investors yields of around 10% over five years.
RateSetter lenders have funded over $36 million in loans on the platform, helping more than 2,100 creditworthy borrowers buy new cars, renovate their homes, get married and consolidate expensive credit card debt at rates significantly lower than that offered by traditional lenders.
Strong demand from SMSF and investors over 55
RateSetter lenders represent a broad cross-section of the Australian investing public, with the age of lenders ranging from 18 to 92 and investments on the platform ranging from $10 to several million dollars. The average RateSetter investor is aged 38, with older investors typically investing more than younger investors. The average amount invested is $16,450.
An area of particular growth over the previous six months has been from SMSF investors and investors over 55. SMSFs lend an average of $57,300, substantially higher than the average lender investment.
Average amount invested by lender segment:
|Segment||Average investment amount||Average interest rate (after fees)|
|All RateSetter lenders||$16,450||7.38%|
|Over 55 (retirees and pre-retirees)||$33,956||6.62%|
SMSF investors are achieving higher returns by focusing on RateSetter’s longer-term 3 and 5 Year Income markets, which are offering returns of up to 10% after fees. 86% of SMSF funds are in RateSetter’s 3 year or 5 year markets, a significantly higher proportion than other investors.
Spread of lenders across loan markets:
|Segment||1 month||1 year||3 year||5 year|
|All RateSetter lenders||11%||11%||28%||49%|
|Over 55 (retirees and pre-retirees)||15%||13%||32%||40%|
That SMSF and over 55 investors are attracted to RateSetter makes sense – in the current economic environment of historically low interest rates and volatile equity markets, these investors are seeking high quality investments which offer attractive, stable returns.
Exceptional credit performance
In reaching 3,000 lenders, we are also proud to celebrate RateSetter’s continued track record in returning to lenders every cent of interest and principal due to them. Lenders tell us that one of the most appealing features of RateSetter is our conservative approach to risk, backed up by our unique Provision Fund, which has ensured that investors have received every cent of principal and interest due to them.
Our conservative approach to lending underlies our exceptional credit performance, with overall defaults representing less than 0.19% of loans funded.
Our unique Provision Fund now contains more than $1.5 million, representing more than 5% of loans outstanding and over 190% of estimated future borrower defaults on current loans outstanding. We think that as public awareness of P2P lending increases, features such as our Provision Fund will help to attract a broader segment of the Australian investing community to RateSetter.
The growth of RateSetter and P2P lending has significant benefits, not just for investors and borrowers, but also for the economy as a whole. To date, our 3000 lenders have earned over $1 million in interest from loans. This interest would’ve previously been destined for a bank’s profit pool, but by connecting investors and borrowers together, both groups get to share in the benefits and get a better deal.
We see this as the start of the democratisation of finance: by providing everyday Australians with access to a previously inaccessible asset class they are starting to reshape and displace traditional institutions. We believe that this displacement will help to spur greater competition and innovation, creating safer, more efficient loan markets for both investors and borrowers.
This information does not constitute financial advice and you should consider whether it is appropriate to your circumstances before you act in reliance on it. Any opinions, forecasts or recommendations reflect the judgement and assumptions of RateSetter as at the date of publication and may later change without notice.