Britain’s biggest peer-to-peer lending platform Zopa has shaved the interest investors can earn, saying it needs to better reflect the low-rate world in which it operates.
In a blog posted on the company’s website, it said all of its lender rates will decrease by 0.2 per cent from the 8 September.
While Zopa admitted it isn’t as closely linked to the interest rate as high street banks, the company said it was prompted by the Bank of England’s recent decision to cut the base rate by 25 basis points to pull its own rates down by the same amount.
Andrew Lawson, chief product officer at Zopa, said headline rates from other loan providers have fallen between 0.1 and 0.3 per cent since the interest rate cut.
“It’s important that we stay competitive while maintaining our high standard of borrower.”
He also pointed out that banks have already reduced their rates dramatically, in many cases by more than 0.25 per cent.
“This lack of competitiveness for investors from the banks has led to a surge in new lenders at Zopa, meaning slower lending speeds and queues of, on average, 10 days for our Classic account.
“This is something we closely monitor and manage.”
Part of the attraction of peer-to-peer is that it offers higher returns than are currently available in more traditional investments, although the sector has generally been criticised among the adviser community.
Zopa’s Access account will reduce to 3.3 per cent, its Classic account will drop to 4.1 per cent, and its Plus account will fall to 6.5 per cent.
Scott Gallacher, director of Leicester-based Rowley Turton, said: “The reality is no bank, deposit taker or lender, is completely disconnected from the bank rate.
“All providers in this market have to compete for savers and borrowers, which means any bank rate change should always filter down in some way or other to the interest rates people pay or receive.”
Mr Gallacher said P2P rates remain competitive when compared to traditional deposit rates, adding however - with the threat of a recession around the corner - we may start to see P2P security really tested.