In last week’s Wall Street Journal article “Interest Rates Defy Rate Cuts,” James Bianco, president of Bianco Research LLC, a market-research firm in Chicago said, “Even though the Fed has eased three-quarters of a percentage point since September, the market has only gotten between 0.25% and 0.50% of that easing. If you look at it from a saver’s and borrower’s side, it shows you that the market is still not functioning properly.”

Although borrower rates and lender rates of return on Prosper are not formally tied to moves by the Fed, the dynamics of the broader credit markets, which have led to a string of rate cuts, clearly seem to be having an impact on the Prosper marketplace. For example, in October average borrower rates for all Prosper prime loans and Prosper Prime Select loans were 12.27% and 9.50%, respectively; down 0.39% and 0.65%, respectively, since the Fed rate cuts.

Continue reading Lower Borrower Rates, Fewer Subprime Loans Funded

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?

Continue reading Did Prosper Anticipate or React to the Fed Rate Cut?