RateSetter has confirmed its interest rates for peer-to-peer investors look likely to remain reduced for the rest of the year.
The peer-to-peer lender halved the rates on offer to investors in May in response to the economic uncertainty caused by the pandemic.
It said at the time that this was expected to last until the end of the year and an update to investors this week said the economic situation has worsened so rates cannot yet be increased.
The reduction is reviewed each quarter.
“Since March the actual performance of the portfolio has not been worse than feared,” RateSetter said in a note to investors.
“However, the economic forecast has deteriorated slightly, with the central case unemployment forecast for the end of this year, as forecast by independent provider Oxford Economics, 6.5 per cent versus the 5.4 per cent forecast in March.”
RateSetter said the interest coverage ratio in its provision fund has increased to 72 per cent but in order for it to reach at least 100 per cent, the interest reduction needs to last longer.
The provision fund’s capital coverage ratio is now at 154 per cent.
“We would like returns to be higher but in an environment where interest rates on savings are at near zero per cent and the FTSE-All Share has recorded a year-to-date fall of over 20 per cent, protecting capital while also earning a positive return is what we remain as focussed as ever on delivering,” RateSetter said.