The UK’s biggest “peer-to-peer” (P2P) lender, RateSetter, has slashed the interest rates it offers to savers by half as it prepares for a wave of loan defaults in the wake of the coronavirus crisis. Savers on the RateSetter platform – who are technically lenders matched up over the internet to borrowers – have been told their interest rates will be reduced by 50% until the end of 2020. The Max 4% account will be cut to 2%, while the Access account will drop to 1.5%. Savers have put £830m into RateSetter accounts but now face a long wait if they want to withdraw. Before the crisis, RateSetter generally took just one day to return cash to investors seeking their money back, but they now take more than a month. About £6bn is tied up in P2P platforms in the UK, but the crisis has been the biggest challenge the sector has faced. Another big player, Funding Circle, has told savers that while they will still receive monthly payments, their access to capital is restricted, and Zopa has stopped approving new loans in its riskier categories and raised costs for borrowers. In a blogpost, RateSetter said that 6% of its borrowers had requested “forbearance” and, as a result, it was increasing its projected loan losses from £27.5m to £39.2m. It said it was basing its projections on a forecast that real earnings will fall by 0.8% in 2020 and house prices by 8%. Unlike most other P2P operators, RateSetter has a provision fund set up to cover losses. It said the interest that would have been paid out would now be diverted to propping up the provision fund. A spokesperson said: “RateSetter’s focus is on protecting all of our investors’ capital and keeping them earning a positive return throughout this downturn. “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.” Some P2P players have completely stopped paying interest. Lending Works, which last year said it had taken in more than £100m and was paying up to 6% interest, has slashed all rates to zero and banned withdrawals for a 90-day period that ends in July. In an update issued at the end of last week, Lending Works said it processed 600 requests for payment deferrals from customers affected by coronavirus between 9 and 24 April, representing 3% of its loan book.