RateSetter has announced a temporary reduction in its interest rates, in response to the economic uncertainty caused by the coronavirus pandemic.
As of today (4 May), all RateSetter accounts will see their interest rates halved, with the expectation that this reduction will remain in place until the end of 2020.
This means that Access account-holders will earn 1.5 per cent per annum, rather than the three per cent rate that was previously offered. This will give Access investors an effective annual rate of two per cent across the entirety of 2020.
Plus account-holders will have their interest rates slashed from 3.5 per cent per annum, to 1.75 per cent per annum, to give an effective annual rate of 2.33 per cent across 2020.
And Max accounts will now be paying two per cent – down from the previous rate of four per cent – resulting in an effective annual rate of 2.67 per cent for 2020.
“The Covid-19 pandemic is having a major impact on the economy,” said RateSetter.
“Central banks have cut interest rates, share prices have fallen and banks have cancelled their dividends for investors.
“It is in this context that we are announcing a temporary 50 per cent reduction in interest. This interest will go to the provision fund. This reduction is expected to last for the remainder of 2020.”
RateSetter added that the interest rate reduction will be reviewed every 30 days, and if economic conditions improve, the platform will increase its rates again “as quickly as possible”.
“We wish we did not have to temporarily reduce interest,” RateSetter said. “But our overriding objective is to protect your money and keep it earning a positive return through this environment.
“RateSetter’s focus is on protecting all of our investors’ capital and keeping them earning a positive return throughout this downturn,” added a RateSetter spokesperson.
“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.”