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P2P investors face another Zopa rate cut

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ZOPA has lowered its lender rates by 0.2 per cent across all accounts, just four months since its last reduction, citing competition in the personal loans market.

The peer-to-peer lender has emailed investors to say target return rates on its Access, Classic and Plus accounts will be reduced from 31 January and could change again.

Access account lenders will see interest rates cut from 3.1 per cent to 2.9 per cent, Classic investors will see a drop from 3.9 per cent to 3.7 per cent, while Plus account holders will see targeted returns fall from 6.3 per cent to 6.1 per cent.

This has led some investors to question whether an account offering 2.9 per cent without Financial Services Compensation Scheme (FSCS) protection is worth the risk.

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Lender rates were last reduced in September, a month after the Bank of England cut interest rates. Andrew Lawson, chief product officer for Zopa, said at the time that while the platform wasn’t “as closely tied to the interest rate as high street banks”, it still had to make changes to stay competitive with other providers.

The email this week also cited market conditions.

“Since I last wrote to you about our lending rates, the personal loans market has become even more competitive,” the email said.

“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.

“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.

“Remember, when you invest your money, your capital is at risk.

“This is why we won’t compromise our prudent lending policies, but we are always looking at new ways of getting your money to more UK borrowers. Just recently we introduced more flexibility in loan terms for borrowers which will increase.”

The changes will apply to newly matched money and those who use the auto top-up.

“We’re always carefully monitoring market conditions and that the rates will always be dynamic so that we can continue to deliver the reliable risk managed returns our customers expect of us,”  a Zopa spokesman said.

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