Pricing Changes – 03/21/2018 – Earlier this week in anticipation of the Fed rate hike, we discussed Prosper’s approach to portfolio pricing in a rising rate environment. Our goal with rate-setting is to deliver value for both sides of the Prosper platform by providing a fair price for borrowers and a reasonable return for investors.
In order to deliver on this objective, the borrower rates offered in our marketplace must react to rate changes in the economy at large. Today, the Federal Reserve announced a 25 basis point (bps) increase in the Fed Funds rate. In light of this development, the rates offered to borrowers through the Prosper platform are being modified.
Pricing Changes 03-21-2018 – Impact Simulation
The table below summarizes the simulated impact of the rate increase on the portfolio originated through the Prosper platform in March month-to-date (MTD) 2018. Overall borrower rates on the platform are increasing by 26 bps.
|
Prosper Rating | Current Borrower Rate (March 2018 MTD) | Proposed Borrower Rates | Variance I/(D) |
| AA | 6.46% | 6.46% | 0.00% |
| A | 8.93% | 9.23% | 0.30% |
| B | 11.43% | 11.73% | 0.30% |
| C | 16.03% | 16.33% | 0.30% |
| D | 23.38% | 23.68% | 0.30% |
| E | 29.14% | 29.40% | 0.25% |
| HR | 31.82% | 31.82% | 0.00% |
| Total | 14.27% | 14.53% | 0.26% |
Federal Reserve policymakers expect to increase rates three times this year; but, compared with December, more officials believe rates need to increase at least four times in 2018 if the economy performs in line with their expectations. We will continue to closely watch interest rate changes and evaluate the need to make further rate increases. We anticipate that this could be as early as the second quarter of 2018. As one of the largest online marketplaces for consumer credit, maintaining a balanced and sustainable marketplace that is equally appealing to both borrowers and investors remains our highest priority.