What returns can peer-to-peer investors expect during the pandemic?
Several peer-to-peer lending platforms have cut their rates of return recently due to the current macroeconomic conditions, but there are still inflation-busting returns on offer.
We analyse the opportunities currently on the market for retail investors.
Zopa
Zopa has not announced any changes to its target interest rates yet due to Covid-19. Its lower-risk Core product offers projected returns of between 3.4 and five per cent, while its Plus account offers four to six per cent.
However, it has stopped lending to borrowers who would normally fall into its higher risk bands C, D and E. The move means its Core product will only fund loans in the A* and A bracket while Zopa Plus will also fund loans in the B risk band.
“To avoid this affecting your returns, we have increased interest rates on A* – C loans,” Zopa said. “These increased rates reflect the uncertainty in the market and also build a significant buffer for investors. Were loss rates to see a large increase, we should still be able to deliver the advertised target returns on these loans.”
RateSetter
RateSetter has temporarily halved its interest rates for all investors in response to the economic uncertainty caused by the pandemic.
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.
Funding Circle
Retail investors are no longer able to fund new loans through the UK’s only publicly-listed P2P lender.
After becoming the first P2P lender to be accredited under the coronavirus business interruption loan scheme (CBILS), Funding Circle has paused all non-CBILS lending from retail and institutional investors to concentrate on supporting the government programme.
Assetz Capital
Meanwhile, fellow accredited P2P lender Assetz Capital has said it will keep its platform open to retail investors while funding CBILS loans.
From the start of May the platform introduced a 0.9 per cent per annum lender fee that will be in place for at least the next three months, the equivalent of 0.07 per cent each month.
This is in response to Assetz seeing a huge fall in its income as a result of Covid-19.
Without factoring this in, the platform offers investors returns from 4.1 per cent to 5.75 per cent depending on the type of account they choose to use.
Other opportunities
Other platforms that investors can look to for good returns include asset-backed lender Ablrate, which offers returns ranging from 10 to 15 per cent, and consumer lender Elfin Market which offers returns of up to 5.8 per cent per year.
Among the property lenders, Relendex offers rates of up to 11 per cent, Blend Network can provide returns of between eight to 12 per cent and The House Crowd lists returns from five to seven per cent depending on the type of account chosen.
Obviously all investments carry some degree of risk and that level of risk is often correlated to the return. But with stock markets in free fall and cash savings rates at record lows, there is still an opportunity for investors to boost their income by considering P2P lending.
