My experience as a small business owner is that banks seem less willing to lend in a low interest rate environment, because there is less margin at low rates. As interest rates rise, I would think banks should be more eager to make loans given the higher margins available, although as some have pointed out, there are higher risks with consumers at the higher rates.
It’s not an elevated risk rate, it’s a smaller pool of qualified applicants and a smaller sum borrowed.
This is due to monthly % of income limits and other risk factors. If the interest eats well, the principle must shrink to remain in balance.
Those are the risks of UPST’s fee based revenue when rates rise.
Less $$$ per loan
These two in tandem can make a growth rate shrivel like an apple slice in an oven.
Banks benefit from rising rates because of the net interest margin growing wider as rates rise. This has nothing to do with UPST (unless they hold the loans - whoops!).
Long UPST. Small position.