Author Topic: Future Fed Interest Rate Increase and P2P Rates  (Read 6074 times)

turing

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Future Fed Interest Rate Increase and P2P Rates
« on: August 12, 2014, 10:44:38 AM »
Janet Yellen said interest rates will probably start increasing in 2015.

Lending Club's interest rates are not officially tied to Prime or Fed Funds rate.

Do you think Lending Club will raise their base interest rate (5.05% right now) when Fed raises interest rates?

Rob L

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Re: Future Fed Interest Rate Increase and P2P Rates
« Reply #1 on: August 12, 2014, 12:38:31 PM »
Yes

AnilG

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Re: Future Fed Interest Rate Increase and P2P Rates
« Reply #2 on: August 12, 2014, 01:24:57 PM »
This old blog post may give you idea how Lending Club sets the base interest rate. If fed increases interest rate, LC base rate should go up when LC committee meets to decide on the base interest rate.

http://andirog.blogspot.com/2012/06/lending-club-base-interest-rate-excess.html

Janet Yellen said interest rates will probably start increasing in 2015.

Lending Club's interest rates are not officially tied to Prime or Fed Funds rate.

Do you think Lending Club will raise their base interest rate (5.05% right now) when Fed raises interest rates?
---
Anil Gupta
PeerCube Thoughts blog https://www.peercube.com/blog
PeerCube https://www.peercube.com

turing

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Re: Future Fed Interest Rate Increase and P2P Rates
« Reply #3 on: August 12, 2014, 04:01:04 PM »
The starting point for base interest rate is the middle of the spread between the interest rate for unsecured consumer credit as published in Federal Reserve Board Consumer Credit G.19 Release and the average interest rate for 6-month certificates of deposit as published in Federal Reserve Board Selected Interest Rate H.15 Release.

That is exactly what I was looking for from the link you provided.  Thanks.

CD yields are very closely aligned with Fed Fund rates.  Unsecured consumer credit (credit cards) are often based on Prime rate which exactly follows Fed Funds rate too.  If Lending Club still follows this policy, Fed Fund rate increase would directly cause increase in their base rate.

Fred

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Re: Future Fed Interest Rate Increase and P2P Rates
« Reply #4 on: August 13, 2014, 04:06:25 AM »
Do you think Lending Club will raise their base interest rate (5.05% right now) when Fed raises interest rates?

Yes.

Every bonafide lending activity in the US is tied to the Fed's interest rates.  Conversely, the Fed is using its rates to (try to) control lending activities in the US.

However, just like all relationships in economics and finance, the rates relationships usually have < 100% correlations and time-lag (inter-temporal) issues.

yojoakak

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Re: Future Fed Interest Rate Increase and P2P Rates
« Reply #5 on: August 13, 2014, 12:45:27 PM »
Finally! I can't tell you how long I've been waiting for this.


Get Ready for Inflation and Higher Interest Rates
The unprecedented expansion of the money supply could make the '70s look benign.
http://online.wsj.com/news/articles/SB124458888993599879

turing

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Re: Future Fed Interest Rate Increase and P2P Rates
« Reply #6 on: August 13, 2014, 01:01:42 PM »
Finally! I can't tell you how long I've been waiting for this.

I'm definitely not excited, but I agree huge spike in money supply and ridiculously low interest rates will eventually lead to inflation.

I think much of the inflation so far has not been in consumer goods we would see with a CPI but in investments like stocks, bonds, gold, startups, etc.


LonghornSF

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Re: Future Fed Interest Rate Increase and P2P Rates
« Reply #7 on: August 13, 2014, 02:14:48 PM »
Finally! I can't tell you how long I've been waiting for this.

Get Ready for Inflation and Higher Interest Rates

People have been beating the inflation drum since '08 and it hasn't happened. In my opinion, with an aging population, reduce population growth, and still somewhat slack labor market, we won't see any significant inflation for awhile. The only area I've seen really seen significant inflation so far is in real estate prices / rent, but that's really specific to just a few regions.

AnilG

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Re: Future Fed Interest Rate Increase and P2P Rates
« Reply #8 on: August 13, 2014, 05:00:10 PM »
You can check whether LC follows the policy by looking at the base rate reported in LC quarterly filings and comparing them with G.19 and H.15 release by FRED. Actually by comparing these numbers you can make quite a decent guess on borrower-lender supply balance.

The starting point for base interest rate is the middle of the spread between the interest rate for unsecured consumer credit as published in Federal Reserve Board Consumer Credit G.19 Release and the average interest rate for 6-month certificates of deposit as published in Federal Reserve Board Selected Interest Rate H.15 Release.

That is exactly what I was looking for from the link you provided.  Thanks.

CD yields are very closely aligned with Fed Fund rates.  Unsecured consumer credit (credit cards) are often based on Prime rate which exactly follows Fed Funds rate too.  If Lending Club still follows this policy, Fed Fund rate increase would directly cause increase in their base rate.
---
Anil Gupta
PeerCube Thoughts blog https://www.peercube.com/blog
PeerCube https://www.peercube.com