As expected the FOMC increased interest rates by 25 basis points. Online lenders argue that this rate hike won't impact their business in the short term. A more serious test would come if rate hikes continue causing borrowers to get nervous and pushing some of them into default.
While an increase in the Fed’s short-term rate will affect some of the mechanics of making loans for banks and nonbank lenders alike, a more serious test would come if rate moves come quickly enough in coming months to spook borrowers and potentially push some into default. A small increase won’t affect Funding Circle, Mr. Hodges said, or cause it to bump up the rates it charges borrowers. “Given the cushion we’ve already built into our loan pricing, we don’t plan to increase rates if there’s a small shift in the base rate,” he said.