Zopa hikes target returns due to increased stability in market pricing
ZOPA has increased its target returns for the first time since 2015.
The peer-to-peer consumer lender said on Friday that target returns on its Core and Innovative Finance ISA (IFISA) Core products have been increased from 3.7 per cent to four per cent, while target returns on its Plus and IFISA Plus products have gone from 4.5 per cent to 4.6 per cent.
Zopa said that investors would still be lending to the same low-risk borrowers but would earn a higher rate of return due to “increased stability in consumer credit pricing”.
The news comes as Zopa starts taking transfers-in of pre-existing ISAs into the Zopa ISA.
Zopa cited research from Moneyfacts that revealed that 2017 was the worst year on record for the amount of interest paid on cash ISAs.
Read more: Zopa investors can now automatically move repayments into their IFISA
“In the same week as new research revealed that 2017 was the worst year on record for interest paid on cash ISAs, we’re delighted to offer investors a return of up to 4.6 per cent for accepting the risk of P2P lending,” said Zopa’s chief product officer Andrew Lawson (pictured).
“Today’s increase in our headline rates reflects what our investors have been seeing for some time – higher rates of return across our four investment products.”
Zopa launched its IFISA in June last year, purely to existing investors to avoid a mismatch of investor funds and new loans.
Last August, Zopa announced that it had scaled back higher-risk lending due to the UK’s worsening consumer credit outlook and lowered its target returns as a result.
Its Plus account was lowered from 6.1 per cent to 4.5 per cent and the Core account was lowered from 3.9 per cent to 3.7 per cent.
The UK government and regulators have expressed concerns about the rise in personal debt. In November, the Bank of England increased interest rates for the first time in a decade, partly to curb spending.
Statistics from the central bank earlier this month showed that the annual growth rate of consumer lending slowed to 9.1 per cent in November 2017 – the lowest rate since December 2015.
