Aave's GHO Risk Council has lifted the core GHO borrow rate on Ethereum to 5%, according to The Defiant, as the protocol's USDC Stability Module ran to near-zero reserves.

The adjustment was applied under the council's existing on-chain mandate, raising the cost of borrowing Aave's native stablecoin on the Ethereum Core market while GHO traded just under its dollar peg. The USDC Stability Module, one of the primary arbitrage tools designed to keep GHO at $1, had been drained when the change landed. The parallel USDT module held approximately 22.5 million USDT.

What does the rate change actually do?

The latest move follows an October 2, 2026 proposal published by TokenLogic, which serves among the GHO Stewards. That proposal called for raising the Core market borrow rate from 4.25% to 4.50% APR. The 5% figure reported by The Defiant sits above that level, indicating additional adjustment after the proposal baseline.

The mechanics are straightforward:

• The Aave Savings Rate paid to sGHO stakers sits at 4.50%
• The previous 4.25% borrow rate let users mint GHO and park it in sGHO for a 25 basis point gain
• Closing that gap removes the incentive to mint purely to farm the savings yield
• Higher rates also push some borrowers to repay, tightening GHO supply

The Prime market received parallel treatment. Under TokenLogic's plan, the Ethereum Prime base rate climbs from 2.75% to 3.00% and the kink rate rises to 4.25%. Prime borrowers retain a 25 basis point discount at optimal utilization, keeping the premium venue marginally cheaper.

Why the empty USDC module matters

GHO Stability Modules are stablecoin swap pools that let users exchange USDC, USDT and other approved assets for GHO at a near one-to-one rate. When GHO trades below $1, traders can buy it cheaply and redeem it through a module for a full dollar of USDC or USDT. That arbitrage is supposed to pull the price back to parity.

The trade drains the module. The USDC GSM has been depleted to near-zero, leaving only the USDT pool to absorb redemption flow. If that pool keeps shrinking while GHO lingers below $1, the council's room to defend the peg through arbitrage narrows.

How the Risk Council operates

The GHO Risk Council executes rate changes by calling a function named updateGhoBorrowRate on specific Aave contracts. Each adjustment must stay within preset per-update limits set by governance. That cap lets the council steer rates quickly without a full Aave Governance vote, but it also limits how far rates can move in a single step.

This marks the third rate adjustment in roughly three months. In August 2026, Aave raised the Core borrow rate from 3.75% to 4.25%. Further changes followed in September before the October proposal.

What borrowers and sGHO holders should watch

For borrowers, the message is direct: holding a GLO loan on Ethereum Core now costs more than it did two months ago, and the Prime market has moved up as well. Leveraged positions and looping strategies built on cheap GHO borrowing need recalculation.

For sGHO holders, ending the borrow-to-stake loop reduces artificial GHO supply that existed mainly to capture the savings yield.

The number to monitor is the USDC GSM balance. If higher borrow rates drive repayments and the module refills, the strategy is working. If the USDT pool continues shrinking while GHO hovers near $0.999, the council may need additional increases within its per-update limits. GHO traded near $0.999 for most of September and the first week of October 2026.

The next move depends on whether stablecoin reserves in the GSMs recover before the Risk Council's next scheduled review.