RateSetter cuts interest rates ahead of expected default spike
Peer-to-peer lender halves rates it offers investors until the end of 2020.
7th May 2020 10:50
by Hannah Smith from interactive investor
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Peer-to-peer lender halves rates it offers investors until the end of 2020.
Peer-to-peer lending platform RateSetter has halved the interest rate its investors can earn for the rest of the year in anticipation of a spike in Covid-related defaults.
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The money saved will go towards RateSetter’s Provision fund, which aims to protect investors from bad loans and maintain positive returns. The platform says it has already seen 6% of the borrowers in its portfolio requesting a payment freeze, in a trend that has been seen across the banking industry. Although it is not obliged to offer payment holidays, it must give customers breathing space under FCA forbearance rules.
The rate on its highest-paying Max account will fall from 4% to 2%, on its Plus account from 3.5% to 1.75%, and on Access from 3% to 1.5% for the rest of 2020.
“We wish we did not have to temporarily reduce interest rates, but our overriding objective is to protect your money and keep it earning a positive return through this environment,” RateSetter said in a statement.
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Other peer-to-peer lenders are also taking action as consumers and small businesses struggle to meet their obligations in the face of the coronavirus pandemic. Assetz Capital has introduced a lender fee of 0.9% a year for all investors, following a sharp drop in income as a result of Covid-19, while Lending Works paused all new lending for 90 days and predicted a rise in losses for the first quarter of this year.
This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.
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