What do BoE rate cuts mean for Loanpad’s investors?

The Bank of England has been gradually lowering the base rate for more than a year now, with the pace accelerating over the past six months. Since January 2025, the base rate has gone from 4.75% to 4.25%, with further cuts predicted before the end of the year.

These rate cuts began in 2024 in response to higher rates of inflation, which spiked post-pandemic and due to the war in Ukraine. The idea is that lowering the base rate reduces the cost of borrowing, encouraging more people to spend. For example, mortgage holders might find that they are able to renegotiate a lower rate when their existing term expires, freeing up some extra money in their budgets each month which can be spent on goods and services, thereby boosting the British economy.

So how will further rate cuts impact Loanpad investors?

The base rate is the interest rate at which commercial banks can borrow money from the Bank of England. If the central bank raises the base rate, it directly affects how much banks pay to borrow money, and they may pass this on to their customers by increasing the cost of mortgages and loans.

Unlike banks, peer-to-peer lending platforms such as Loanpad do not borrow money from the Bank of England. Instead, Loanpad’s funds come from its investors and investing partners directly.

While the Bank of England’s rate cuts have an indirect impact on the broader financial ecosystem across the UK, for the P2P sector, this impact is more nuanced.

1. Rates

P2P lending platforms can typically offer higher investor returns than traditional savings accounts because they operate outside the traditional banking system. A reduction in the Bank of England’s base rate can drive traditional savings rates lower, making P2P loans potentially more attractive to investors seeking higher returns. However, this could also result in lower interest rates on P2P loans as platforms adjust their offerings in response to cheaper borrowing costs.

2. Loan demand

The availability of cheaper financing could see demand for loans soar, and P2P lending platforms could benefit from this boost by receiving more borrower requests. However, P2P lenders such as Loanpad follow very strict due diligence protocols, which means that only the most creditworthy borrowers will be offered funding, no matter how many applicants there may be.

3. Search for returns

A lower base rate also means that bank-based savings rates may be reduced. This could send one-time savers seeking out higher-risk investment options such as stocks and shares or P2P loans. The government is currently discussing ways to encourage more savers to become investors, and this campaign could also have the effect of encouraging more people to diversify their finances and consider P2P lending and other alternatives.

At Loanpad, we are currently targeting returns of between 5.1 and 6.1 per cent for our investors, depending on what type of account is chosen. We try to keep our rates ae competitive and consistent as possible.

In the past, when we have changed our rates we have made these changes slowly and gradually, so that our investors can adjust their portfolios and make any necessary changes. We will always communicate any rate changes with our investors clearly, while always ensuring that we continue to deliver the great service that we are known for.