Assetz Capital has cut target interest rates on its three auto-invest accounts, to reflect the economic challenges caused by the pandemic.
The peer-to-peer lender said that the published target rate on its quick access account is being reduced to 3.75 per cent, its 30-day access account is being cut to four per cent and its 90-day access account is being reduced to 4.1 per cent.
Target interest rates were previously 4.1 per cent, 5.1 per cent and 5.75 per cent respectively.
For existing investors, the new rates for the quick access and 30-day access accounts will apply from 1 June, while the 90-day access account target rate will change in 90 days.
The Manchester-based firm said that it had studied the information available, including Bank of England forecasts that suggest there will be a difficult economic environment before an eventual recovery.
“While we see the present target rates as achievable historically (pre-coronavirus, when they demonstrably delivered those rates every month) and achievable again post-coronavirus, assuming the Bank of England forecasts are reasonably accurate, they are not a fair representation of what is achievable at this point in time in the midst of the economic turmoil and with so many businesses having trading challenges,” Assetz said.
“Therefore we need to align them with the current reality of payments expected from borrowers in the shorter term with a view to increasing them again once the effects of the pandemic have passed.”
The new target rates are inclusive of the temporary lender fee introduced on 1 May, following a decline in the platform’s income due to the Covid-19 pandemic.
Investors have to pay a new funds under management fee of 0.9 per cent per annum that is in place for at least three months from 1 May, which is the equivalent of 0.075 per cent per month.
“We intend to increase the target rates again as soon as it is reasonable to do so but we cannot predict nor promise when that will be,” Assetz said. “We feel that the new target rates, while reduced for the time being, still offer a fair return in the current economic climate with other asset classes seeing significant volatility and/or capital losses and other income-producing investments seeing very low rates or cancelled dividends.”
Assetz delivered a 3.75 per cent return to investors across all of the access accounts in April and expects to deliver returns of 4.1 per cent for its quick access investors in May, and 4.4 per cent for its 30 and 90 day access accounts. This is inclusive of the temporary lender fee.