The P2P lending platform says it is now targeting higher payouts in both its Core and Plus accounts.
Zopa will increase its rates to 4.5 per cent for its Core and 5.2 per cent for its Plus accounts. Returns have increased from 4 per cent for Core and 4.6 per cent for Plus respectively.
The higher target returns reflect pricing improvements in the loans market, Zopa says, as well as the Bank of England’s recent base rate rise in August to 0.75 per cent. This was the UK’s second rate rise in a year, following last Autumn’s rise from 0.25 per cent to 0.5 per cent.
However, while that was a level prompted by the Brexit vote’s huge uncertainty, the more recent rise reflected the first rise above 0.5 per cent since the Financial Crisis’ nadir in March 2009.
Zopa cut its rates in order to remain competitive in a crowded market of prime consumer lenders in 2016 following an interest rate cut to 0.25 per cent from the UK central bank, several times dropping its interest rates and henee the returns it targets for investors.
The Bank of England’s governor Mark Carney has said there will be further "gradual" and "limited" rate rises in the coming year or so.
Andrew Lawson, Chief Product Officer, said: “We’re delighted to offer investors a return of up to 5.2 per cent for accepting the risk of peer-to-peer lending".
“As demand for Cash ISAs drops to an 18 year low, the IFISA stands as an excellent middle ground for people who are looking for an alternative to the Cash ISA but don’t want to take on the risks or volatility associated with investing in the stock market," he added.