Banks ask for more security

Lenders have asked 27 associations to put up an extra £225 million in cash or property as security on the agreements between July and October, known as stand alone swaps. In comparison, associations were asked for £160 million more between April and July. However, the figures for both quarters are far smaller than the £396 million which lenders asked associations for at the start of the year.

Stand alone swaps are a form of derivative which some associations have invested in, to offset possible interest rate rises.

Under the deals, lenders can ask associations to put up more security in cash or property should rates on swaps fall below a specified amount.

In its quarterly financial report, which covered July to October 2009, the Tenant Services Authority said the increased demand for security on swaps had been triggered by a drop in swap rates.

It also said the number of unsold low-cost homeownership properties had fallen to 6,600 units - down 19 per cent on the previous quarter.

Demand for new loan facilities was significantly lower than last year. £1.2 billion of new borrowing was agreed in the first half of 2009/10 compared with £7.1 billion in the previous full financial year.

Meanwhile, the TSA said associations would need to borrow between £20 billion and £25 billion from banks and investors over the next five years.

The regulator’s private finance strategy predicted that banks would be willing to make loans of £20 billion over the period while investors would provide £5 billion to £10 billion through the capital markets.

Homes and Communities Agency statistics also revealed there were 14,136 housing starts and 20,177 completions delivered under the national affordable housing programme in the six months to 30 September

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