In May Virgin Group purchased a majority stake in CircleLending. Today they have announced they are using that as a platform for a new US peer to peer lending site. Virgin Group is a $20 billion dollar company, and is run by well known billionaire Richard Branson. A coming out party is scheduled to be held in Boston today where Richard Branson is going to hand out red dollar bills with pictures of him and his mom on them. Reportedly Richard's mom lent him several thousand pounds through the new peer-to-peer lending site.
Virgin Group plans to use this site to expand its offerings over the next year to include things like small business financing, student loans, and larger-scale loans.
Prosper market anticipates Fed rate cut
In Prosper's second monthly lending market survey, CEO Chris Larsen says that the Prosper marketplace appears to anticipate Federal cuts in the intrest rate. Specifically he says a drop in the rates borrowers are paying on loans is close "to what was widely anticipated to be a quarter-point instead of a half-point reduction by the Fed." Here is the full text of Larsen's October announcement:
"When the Fed cuts interest rates people often expect mortgage rates to drop. However, this is rarely the case given that mortgage markets typically anticipate rather than react to moves by the Fed. On the flip side of the coin, the variable credit card and savings rate markets react sometime after the Fed moves. In fact, some variable credit cards have a 90-day window to make adjustments reflecting the rate cut. So the question is: did the Prosper marketplace anticipate or react to the Fed rate cut?
Many might assume that the Prosper marketplace would act less like the mortgage markets and more like the credit card and savings rate markets given that the latter compete with Prosper. Nevertheless, the month over month drop in average borrower rates indicates that the Prosper marketplace may have anticipated the Fed cut.
For example, in September the average borrower rates for all prime and near prime loans funded in the Prosper marketplace were 12.29% and 18.22%, respectively; down 0.37% and 0.28%, respectively, from August.
What is interesting about these percentage drops is how close they are to what was widely anticipated to be a quarter-point instead of a half-point reduction by the Fed. However, what remains to be seen is whether the market will continue to push rates down further in line with the Fed’s surprise move."
Last month Larsen said, lenders are exhibiting rational behavior and "being far more cautious about chasing higher rates offered by subprime borrowers."
"When the Fed cuts interest rates people often expect mortgage rates to drop. However, this is rarely the case given that mortgage markets typically anticipate rather than react to moves by the Fed. On the flip side of the coin, the variable credit card and savings rate markets react sometime after the Fed moves. In fact, some variable credit cards have a 90-day window to make adjustments reflecting the rate cut. So the question is: did the Prosper marketplace anticipate or react to the Fed rate cut? Many might assume that the Prosper marketplace would act less like the mortgage markets and more like the credit card and savings rate markets given that the latter compete with Prosper. Nevertheless, the month over month drop in average borrower rates indicates that the Prosper marketplace may have anticipated the Fed cut.
For example, in September the average borrower rates for all prime and near prime loans funded in the Prosper marketplace were 12.29% and 18.22%, respectively; down 0.37% and 0.28%, respectively, from August.
What is interesting about these percentage drops is how close they are to what was widely anticipated to be a quarter-point instead of a half-point reduction by the Fed. However, what remains to be seen is whether the market will continue to push rates down further in line with the Fed’s surprise move."
Last month Larsen said, lenders are exhibiting rational behavior and "being far more cautious about chasing higher rates offered by subprime borrowers."
Prosper Announces New Upcoming Lender Features at Finovate Conference
Prosper announced some new upcoming features at the FINOVATE conference this week. Included in the changes are a more transparent risk estimator when placing a bid. Currently Prosper shows Experian default rates to estimate the risk. Now they have enough data from Prosper loans to start displaying the risk based on Prosper's historical default rates which should give a more accurate picture of the expected returns.
Prosper also announced plans for building auto-portfolios much like the ones that are available at Lending Club. You will be able to select a portfolio based on your risk tolerance and your desired return. This is similar to the standing order options they currently have, but with the new interface Prosper will set the standing order criteria that best matches the selected portfolio.
Along with these changes Prosper has announced that they will be increasing the servicing fees for A loans to 1% and decreasing the servicing fee for AA loans to 0% (not a misprint).
Prosper also announced plans for building auto-portfolios much like the ones that are available at Lending Club. You will be able to select a portfolio based on your risk tolerance and your desired return. This is similar to the standing order options they currently have, but with the new interface Prosper will set the standing order criteria that best matches the selected portfolio.
Along with these changes Prosper has announced that they will be increasing the servicing fees for A loans to 1% and decreasing the servicing fee for AA loans to 0% (not a misprint).
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