Since 2008, a number of changes have occurred affecting the U.S. financial industry and its regulations; simultaneously financial technology has also been evolving rapidly and market conditions have actually been a catalyst for P2P lending platforms; Forbes finds, as many market experts have recently discussed, that P2P lending platforms' extension of credit to a more diverse range of borrowers and built in accountability through investors and lenders, is providing a new type of support for the credit market that could help to prevent another crisis in the future. Source
The Federal Open Market Committee raised its target for the federal funds rate to 0.50% to 0.75% at its December meeting; Fed officials also signaled a more aggressive approach for rate increases in 2017 with projections showing the potential for three more rate increases next year; improvements in the labor market, positive GDP growth and stable inflation were key market factors for the rate increase. Source
According to data from the Bank of England, unsecured consumer credit in the UK increased to 1.9 billion British pounds ($2.34 billion) in November and reported its highest level since March 2005; experts believe UK consumers have been increasing debt to take advantage of the market's low interest rates; P2P lenders have benefited from the increased demand for debt, reporting the highest growth rate in unsecured lending over the past five years, according to a November 2016 PwC survey; in the corporate market, businesses reported lower demand for credit with bank lending to non-financial businesses down 767 billion British pounds ($945 billion) in November. Source
A quarterly report from the New York Federal Reserve says household debt has reached its highest level since 2008 at $12.58 trillion; household debt increased $226 billion in the fourth quarter of 2016; home and auto loans represent the majority of the debt; despite the increase, bankruptcies and foreclosures for the fourth quarter reached an 18-year low indicating consumers are capable of managing the added debt. Source
Consumer borrowing increased by $15.2 billion in February, according to a report from the Federal Reserve; credit card borrowing increased by $2.9 billion helping total credit card debt outstanding to increase to $1 trillion; auto loan and student loan borrowing also increased in February by $12.3 billion. Source
Tuesday's 3.2% GDP growth rate report is an indication of expanding economic growth in the US which increases the probability of a rate hike from the Federal Reserve in December; a continued positive trend in economic growth is also likely to lead to five interest rate increases through 2018; consumer spending appears to be the leading catalyst for current economic growth and the source cautions that it could lead to problems for the marketplace lending credit market; consumer spending has been driven by increased credit balances but as rates rise, risks from these borrowers are also likely to increase which could affect platform defaults and securitization portfolios with the greatest risks in unsecured loans. Source
Non-bank lenders like OnDeck, CAN Capital and Kabbage have originated billions in small business loans, but some fear they might be repeating the mistakes made by banks with subprime mortgages; recent overdue payments on securitizations are raising questions about predatory lending and marketing tactics; the small business market is significantly smaller than the mortgage market, and so the risk of another global financial crisis is small. Source
Deutsche Bank has reported increased defaults in commercial mortgage backed bonds tied to malls and retail stores that they underwrote in 2012 and 2013; the bank is suggesting investors short the BBB- rated portion of the 2012 Markit CMBX price index, known as the series 6, which they say is tied to these investments; their analysis sees these bonds with pre-crisis attributes which successful investors shorted to avoid losses. Source
The Bank of England's Financial Policy Committee discussed concerns over consumer credit defaults in its recently released minutes; credit card, bank loan and car loan borrowing has increased and the Bank is also concerned about prolonged interest free offers and eased underwriting standards; stress testing has revealed potential losses for banks of 18.5 billion British pounds ($23 billion) on their consumer credit loans and 11.8 billion British pounds ($15 billion) on their mortgage loans; as the Bank monitors consumer lending, it is likely new constraints will be required to manage risks in the new economic environment. Source
Financial institutions reported decreased bank lending in China in March; according to a report from the People's Bank of China, financial institutions issued new loans of 1.02 trillion yuan ($148 billion) in March, a decrease from CNY1.17 trillion ($170 billion) in February; nonbank lending increased in March, with total social financing reported at CNY2.12 trillion ($308 billion), an increase from CNY1.15 trillion ($167 billion) in February. Source