27 January, 2017

Zopa Starts 2017 with Another Investor Rate Cut

Zopa Starts 2017 with Another Investor Rate Cut

This week, Zopa announced that it will be cutting its investor rates again –  effective end of January. December saw Zopa restrict funds onto the platform, but another rate cut signals an increase in competition in the market, driven primarily by the banks starting to lend again. In an email to investors, Zopa’s chief product officer, Andrew Lawson, explained that the rate cut came as a result of competitive market conditions.

“As our rates reflect the wider loans market, we’ve decided to adjust the target returns for each of our products. From 31 January the headline rates will be: Access: 2.9%; Classic: 3.7%; and Plus: 6.1%”

One investor in Zopa made their feelings abundantly clear on Twitter:

It has become apparent that the Bank of England base rate cut of 25 basis points in Summer 2016 has increased the pressure on peer-to-peer lending platforms to compete with bank lending. At the time of the first Zopa rate cut in September 2016, Andrew Lawson cited other P2P platforms as the stimulus for reducing its rates and not necessarily the BoE base rate cut as Zopa wasn’t “as closely tied to the interest rate high street banks [are]”.

Data from the Orca Platform determined that one Zopa product has actually seen four rate reductions since June 2016. The table below traces Zopa rates across the product range from May 2016 – December 26th*.

Orca Platform analytics: Zopa rates 18-05-16 to 26-12-16

Every Zopa rate change (whether increase or decrease) recorded below was made to the tune of 20 basis points – 0.2%.

Zopa Plus
  • 28th May ’16:                   6.5% to 6.7%
  • 9th September ’16:         6.7% to 6.5%
  • 29th October ’16:            6.5% to 6.3%
  • 26th December ’16:        6.3% to 6.1%
Zopa Classic
  • 8th June ’16:                   4.5% to 4.3%
  • 9th September ’16:       4.3% to 4.1%
  • 29th October ’16:          4.1% to 3.9%
  • 26th December ’16:      3.9% to 3.7%
Zopa Access
  • 9th September ’16:        3.5% to 3.3%
  • 29th October ’16:           3.3% to 3.1%
  • 26th December ’16:       3.1% to 2.9%

*Rate drop 26th December 2016 will come into action on 31st January 2017 for all products.

Zopa’s email to investors made it clear that as long as a competitive lending environment continues to exist, product rates will be scrutinised and changed accordingly if need be:

“As the market conditions continue to evolve, these rates may change again. We carefully monitor and adjust our rates to deliver the reliable, risk-managed returns you’ve come to expect from Zopa. For us, this is the most important thing.”