RateSetter halves interest rates for the rest of 2020

The lending platform has reduced interest rates from 3 per cent to 1.5 per cent.

Alternative lender RateSetter has lowered its investor interest rates from 3 per cent to 1.5 per cent as a result of “the current economic climate.”

The lending platform announced the reduction in a blog post on its website and says the 50 per cent reduction in its interest rates is wholly caused by Covid-19 and the economic disruption it has caused. 

RateSetter also revealed that it has seen an increase in borrowers asking for a payment freeze, amounting to 6 per cent of the portfolio. 

The lender has also reduced its loan portfolio from £854m in February 2020 to £831m in March 2020 and despite reducing its loan portfolio RateSetter predicts higher future credit losses from £27.5m in February 2020 to £39.2m in March 2020.

RateSetter confirmed that the interest rate reduction is likely to last for the rest of 2020.

A spokesperson for RateSetter said: “RateSetter’s focus is on protecting all of our investors’ capital and keeping them earning a positive return throughout this downturn.”

“Compared to other mainstream investments such as the FTSE 100 and corporate bond funds that’s a good outcome and we will continue to deliver more value than cash.  We are committed to looking after our investors, and if conditions improve, returns will increase.”

Towards the end of last month, the fintech claimed its loans were among the most stable assets during the first quarter of 2020, amid wider market volatility.

Exactly a week ago, RateSetter’s CEO Rhydian Lewis said he believed coronavirus could herald the emergence of “huge confidence” in alternative lending platforms, as long as the industry gets through the next few months.