Loan interest rates are determined by the interaction of supply and demand of capital in an open market. To operate sustainably, we must periodically adjust the interest rates of our products based on prevailing market conditions, and recent market conditions have prompted us to revise our rates.
Demand for USD liquidity is currently at an all-time high, mirroring the rising price of Bitcoin. Nobody wants to sell their bitcoin in this environment. Accordingly, our cost of funding for loans has increased materially.
Why is the cost of capital increasing so rapidly? In addition to increased retail borrowing demand for dollars, other market participants, like proprietary trading firms and hedge funds, are also increasing the institutional demand for dollars. These firms borrow dollars to invest into speculative trading, and when asset prices are appreciating rapidly as they have been in the past few weeks, these firms are willing to pay very high rates to borrow dollars, as the borrowing cost is far lower than the returns they’re able to generate. Ledn competes with these firms in accessing the institutional lending market, which we use to fund our retail loans. When our cost of funding rises, we unfortunately have to raise our lending rates.
At Ledn, we place risk management above all else in order to keep our client assets safe. We only deal with high quality institutions that pass our rigorous vetting process, and therefore we may pay higher borrowing rates than our competitors. If another lender is willing to lend at below market rates, ask them how.
We understand that changes like this can impact your borrowing plans, but please be assured that this decision was made after careful consideration of current market conditions and our commitment to maintaining the sustainability and quality of our services. We are constantly expanding our network of high quality sources of USD funding and should the cost of funding come down, we will pass the benefits of lower borrowing costs on to our clients (as we have in the past).
Regards,
John Glover, Chief Investment Officer at Ledn
