Bank Rates have risen abruptly three times since March, and Private Lenders like Hosper are slowly following suit. Unlike Institutional Lenders (Banks), Private Lenders do not have the ability to hike up their rates abruptly and
must do so carefully and gradually over time instead. This is because Private Lenders must compete with one another to attract deals and ensure borrowers do not find a better deal elsewhere (the most common reason deals get cancelled); And in order to remain competitive with both borrower rates and investor returns Private Lenders must consider a constant balance between the two.
Today we are seeing an increased demand for lower risk deals. This trend is echoed across all Private Lenders in Ontario, resulting in a more scarce supply of low risk deals, and such rates that can only afford to increase marginally. Alternatively, returns at the higher end of the spectrum are seeing a larger increase in yield year over year.
Hosper's pipeline of deals has reduced noticeably over the past few months. This reduction is a result of two leading changes:
- Hosper’s approval process is more selective with the current market shift, ensuring the highest quality deals are presented to our funding partners.
- Of the deals that we approve, we are seeing a smaller percentage of borrowers accepting our terms and following through (~35% less). Since we have raised our rates higher and faster than our competitors, we are experiencing a slightly higher percentage of cancelled deals, meaning competitors are winning some of our business.
Nevertheless, there is still a healthy flow of quality deals into Hosper's pipeline with a clearly seen hike in our rates since the beginning of the year.
If you have any questions about the above information, please contact your Hosper Investment Representative. No question is too big or too small – We’re happy to help!