Aave has proposed raising the base borrowing rate on its Horizon market from 3.00% to 3.25% after GHO traded below its $1 peg for 30 straight days. The plan also adjusts Stability Module redemption fees on Ethereum, Monad and Arbitrum and doubles Monad's GHO reserve limit.
Aave has proposed raising GHO's base borrowing rate on its Horizon market to 3.25% from 3.00%, after the stablecoin traded between 6.7 and 13.6 basis points below its $1 target over the preceding 30 days. The September 14 parameter update put GHO 12 basis points below par.
The proposed 25-basis-point increase pairs with changes to Stability Module redemption fees on Ethereum, Monad and Arbitrum. Aave's stated aim is to address the supply and selling dynamics that have accompanied a sharp expansion of GHO borrowing on Horizon.
Horizon borrowing growth drives the discount
GHO debt on Horizon rose to 39.0 million from 23.2 million during the 30-day period, a 68% increase. Aave's stewards linked part of the expansion to selling pressure created when users borrow GHO through leveraged strategies and exchange it for other stablecoins.
Independent market data from Aavescan showed 39.0 million GHO borrowed on Horizon as of September 12, with the market's GHO borrowing rate at 3.00%. Those figures corroborate the debt and rate levels cited in the governance update. The discount is modest in dollar terms, but it is material for a stablecoin designed to trade at $1.
Leveraged loops add sell pressure
According to Aave, Horizon's comparatively low borrowing cost has supported looping strategies in which users mint GHO, use it in further leveraged positions, then sell the borrowed tokens into other stablecoins. That activity can add GHO supply to the market while creating immediate sell flow, the proposal said.
Raising the Horizon base rate by 25 basis points would make that borrowing incrementally more expensive without eliminating its pricing advantage relative to Aave's other GHO markets. Even after the adjustment, Horizon would remain below the 3.84% base rate on Prime and the 4.25% rate on Core. The governance post does not present the rate move as a standalone solution — it pairs the change with adjustments to the Stability Module's redemption framework.
Fee changes vary by chain
Aave also proposes increasing the USDC redemption fee to 15 basis points from 10 basis points on Ethereum, Monad and Arbitrum. The fee for Ethereum USDT would move the other way, falling to 10 basis points from 15 basis points.
Those divergent changes reshape the relative cost of redemption routes rather than applying a single fee increase across all supported assets. Monad would also receive a separate capacity change: its GHO reserve limit would double to 50 million from 25 million under the same proposal.
Taken together, the measures target both sides of the dynamics Aave identified: the price of borrowing GHO on Horizon and the economics of exchanging GHO through Stability Module liquidity.
Source: Aave Governance Forum
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