Time for LC to Raise Interest Rates?

[Rob L]

The high yield corporate (junk) bond ETF symbol HYG has fallen over the past few months and is now up to a weighted avg YTM of 7.65%. This just passed the highest level reached during the correction of 2011, and you have to go back to the great recession to see a higher YTM. If the market is pricing risky but secured corporate loans at the highest rates in years, shouldn't unsecured loans to individuals be similarly priced? If bad things happen we could be in for a rough ride (as a few have mentioned on this forum recently).

LC raised rates between mid 2011 and mid 2013. Since then rates have been significantly lowered.
https://www.lendingclub.com/info/demand-and-credit-profile.action" class="bbc_link" target="_blank">https://www.lendingclub.com/info/demand-and-credit-profile.action
Time for LC to begin raising them again?
Are HYG or other investments beginning to look more attractive than LC, or are they too volatile to be considered LC alternatives? If not HYG, then what?

[AnilG]

You are comparing a liquid investment (HYG) with illiquid investment (LC loans). The YTM on HYG has gone up because the price of HYG has gone down. The interest rate of corporate bonds held in HYG portfolio hasn't changed. If LC Loans were as liquid as HYG, the price of these LC Loans would have gone down too. If you want to compare HYG YTM with LC Loan YTM, discount the current value of your LC Loans portfolio by same percentage as the HYG price drop and then compare the YTM between HYG and LC Loans.

https://forum.lendacademy.com/index.php?topic=3435.msg30588#msg88888888Quote"> from: Rob L on October 02, 2015, 11:57:14 AM

[rawraw]

I seriously doubt LC would have gone down.  Just because high yield debt is a lot of oil companies and their debt is now being readjusted for their current level of risk, I don't see why LC would increase rates.  Just because two things yield the same doesn't mean they are comparable.  The rates on unsecured consumer loans offered by lenders would be the comp and those rates have not materially changed.  The credit risk on a secured junk corporate and credit risk on a mostly prime consumer portfolio is not the same at all. 

[Fred]

LC's interest rates are affected more by lender-borrower balance than by the Fed's rates.

I think the balance has been tilted toward lender for a while, causing LC to bring more borrowers by lowering the rates.

If LC starts noticing a lot of unfunded loans, signifying not enough appetite from the lenders, then it could potentially increase the rates again.

[Unfolder]

It's a debtors market! As competitors to LC rise, all will pursue the same debtors...we are not the customers, only mercenaries that keep LC greased. If one mercenary goes down, many others will take their place, so no need to pay them more with higher interest rates, especially when a moderately sized bank could probably buy up the entire P2P market in a day as it currently stands. Indeed, if tomorrow LC gave a 1% interest rate haircut across the board, I would grouse and bitch, then keep buying more notes and thank them for the privilege   https://forum.lendacademy.com/Smileys/default/embarrassed.gif" alt=":-[" title="Embarrassed" class="smiley" />

[TravelingPennies]

And today LC finally raises interest rates! It's about time.
D's get a 34 basis point bump and E's a 77 basis point bump.
No small thing and very much needed! Self interest aside, it was a smart move.

[lascott]

https://forum.lendacademy.com/index.php?topic=3435.msg31585#msg88888888Quote"> from: Rob L on December 22, 2015, 07:31:15 PM

[Fred93]

Lascott, where did you get those numbers?  Your numbers show rates going down, whereas their release says rates going up.  I'm confused.

[TravelingPennies]

https://forum.lendacademy.com/index.php?topic=3435.msg31587#msg88888888Quote"> from: Fred93 on December 22, 2015, 08:48:50 PM

[TravelingPennies]

https://forum.lendacademy.com/index.php?topic=3435.msg31588#msg88888888Quote"> from: lascott on December 22, 2015, 09:13:16 PM

[TravelingPennies]

https://forum.lendacademy.com/index.php?topic=3435.msg31589#msg88888888Quote"> from: Fred93 on December 22, 2015, 09:56:09 PM

[TravelingPennies]

I got an email about this. Added the right most new columns.

Image: http://i.imgur.com/BJ8xyub.png" class="bbc_link" target="_blank">http://i.imgur.com/BJ8xyub.png
https://forum.lendacademy.com/proxy.php?request=http%3A%2F%2Fi.imgur.com%2FBJ8xyub.png&hash=07f982694648c3484e29fd58431a073c" alt="" class="bbc_img" />

[Ran]

E-G grades 1-2% rate increase. Those notes should be on fire sale on Folio now
https://forum.lendacademy.com/index.php?topic=3435.msg1#msg1">Quote"> from: lascott on April 20, 2016, 10:11:26 PM

[TravelingPennies]

Thank you LC!

[Emmanuel]

Here's our take on it: The most noticeable aspect in the increase in spread, not the average rates going up.

https://forum.lendacademy.com/proxy.php?request=http%3A%2F%2Fi2.wp.com%2Fblog.lendingrobot.com%2Fwp-content%2Fuploads%2F2016%2F04%2Flc_rates.png%3Fw%3D923&hash=95a56efc5ed93a9fdd10a2d82a6ae396" alt="" class="bbc_img" />

See more on http://blog.lendingrobot.com/industry/a-short-history-of-lending-club-rates/" class="bbc_link" target="_blank">http://blog.lendingrobot.com/industry/a-short-history-of-lending-club-rates/