RateSetter will end its stabilisation period and return to full interest for investors from tomorrow (28 January 2021).
On 4 May, the peer-to-peer lending platform introduced the temporary interest rate reduction, with half of lenders’ interest going to the provision fund to provide for the expected impact of the pandemic on the loan portfolio.
At the time RateSetter predicted the interest reduction would last until the end of the year, but on 3 November said it was unable to change it yet and would review it quarterly.
Following the first quarterly review last week, RateSetter has announced it will end the interest reduction after the interest coverage ratio returned above 100 per cent for the first time since the pandemic began.
The platform said since its drop to 74 per cent following the coronavirus outbreak last March, the interest coverage ratio rose to 92 per cent in November and then to 101 per cent at the end of December.
RateSetter put this down to the interest reduction itself, the performance of the consumer portfolio and portfolio sales that have been executed ahead of expectations.
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With all new lending being funded by Metro Bank since its acquisition of RateSetter in September 2020 and the investor portfolio now in run-off, the platform said its target is to keep the interest coverage ratio at or just above 100 per cent.
RateSetter said it will continue monitoring performance actively and prudently and if conditions deteriorate in the future it will introduce another interest reduction in an attempt to return the interest coverage ratio to 100 per cent.
“Thank you for being a RateSetter investor,” RateSetter said in an email to its lenders.
“Our overriding objective throughout this downturn has been to protect your money and keep it earning a positive return which is being achieved.
“We will continue to provide the monthly provision fund update as the portfolio runs off.”