Zopa cuts investor rates (again)

Leading peer-to-peer lender Zopa drops its targeted investor returns for the third time in quick succession.

Zopa, the UK’s oldest and largest peer-to-peer lender, has notified investors that it will be cutting its targeted returns by 0.2 per cent across all accounts for the third time since first making changes in September of last year. With each successive rate cut, Zopa has cited increased competition within the broader consumer credit sector as the primary driver of the move.

“Nine of our competitors have dropped their rates by an average of 0.35 per cent since the beginning of December, and we anticipate that these market conditions will remain in the coming months,” wrote chief product officer Andrew Lawson, in an email to lenders.

Although Zopa has claimed in the past not to be linked to shifts in the base rate, it’s now pretty clear that the Bank of England's decision to slash rates to the historic low of 0.25 per cent in August of last year has had a marked impact on the platform.

Zopa’s typically lends to “prime” or “near-prime” borrowers. When rivals in this space such as banks and building societies decide to drop their rates for borrowers, Zopa is then left with a choice: lower its own rates accordingly, or begin lending to less credit-worthy customers. To date, the company has opted for the former option.

The new targeted returns for Zopa’s three investor accounts are as follows:

- 2.9 per cent for Access

- 3.7 per cent for Classic

- 6.1 per cent for Plus

The platform’s targeted returns have now fallen by 60 basis points across all three of its lender accounts since the summer of last year.

In addition to falling rates, Zopa has also been adjusting the way that it allocates investor cash. The platform recently introduced queue times for each of its investor accounts, and will prevent new money from being loaded onto the platform should these queue times become too long.

Lawson’s email to investors warned that rates may change again as market conditions “continue to evolve”. He also advised that, while Zopa won’t be comprising its “prudent lending policies”, the platform is actively looking for new ways of lending money out more efficiently.

“Just recently we introduced more flexibility in loan terms for borrowers which will increase demand for Zopa loans and have a positive effect on your time to lend,” he wrote.

More colour on Zopa's evolving interest rates from AltFi Data below...