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The Federal Open Market Committee Wednesday voted to raise federal interest rates from nearly zero for the first time since 2008, meeting market expectations but ushering in a new and uncertain normal for the banking industry.
December 16 -
Bank officials say they are ready for rising rates; disagree on how much the initial increase would help or hurt lending and the economy; and predict more rate increases next year.
December 16
Lending Club, the nation's largest marketplace lender, announced Tuesday that it has raised interest rates on its new loans by an average of 0.25% in the wake of the Federal Reserve Board's recent rate hike.
The move is meant to ensure that returns on the San Francisco firm's new loans, which are sold to investors through an online platform, will remain competitive with other investment opportunities.
"We want to make sure we continue to be as attractive to investors as we were before last Wednesday," said Lending Club Chief Executive Renaud Laplanche.
However, the yields on Lending Club's existing loans are expected to become slightly less attractive in comparison to certain other investments. That is because Lending Club makes fixed-rate loans that do not re-price when interest rates rise.
Most of Lending Club's borrowers use the loans to refinance credit-card debt at a lower rate. With interest rates on variable-rate credit cards expected to reset to higher levels, those customers should continue to see similar levels of cost savings, even after the rate increase.
In recent months, the likely impact of a rising-rate environment has been a frequent topic of discussion inside the marketplace lending industry. Some analysts have expressed concern that some hedge funds and other institutional investors will quickly exit the sector when other opportunities become more attractive.
On Tuesday, Lending Club was advertising annual percentage rates of 5.99% to 32.99% on 36-month personal loans. Lending Club's investors have earned average historical net returns of 5.23% to 8.82%, according to the company.
The fast-growing company has originated $7.1 billion in loans over the last four quarters.
