Associations enjoy dip in interest rates

In its latest quarterly review of housing associations, it reports a reduction in margins offered on new finance. The review reports that housing associations are typically borrowing at 175 basis points over Libor - the rate at which banks lend to each other.

This represents a significant drop in the lending rate of 200 to 300 basis points which housing associations faced for most of 2009. The report adds that at the peak of the recession the TSA received reports of margins on lending rates of up to 400 basis points.

Each basis point represents one hundredth of 1 per cent.

The report says there is a general consensus that the drop has been driven by the fact there are more lenders now willing to lend to the sector.

The report emphasises that associations enjoyed even more favourable rates before the credit crunch.

Inside Housing reported in February that the amount of money raised by housing associations on the bond markets in the past six months is set to soar to £1.1 billion.

The TSA report confirms that housing associations had raised £818 million in this way in the nine months to the end of December 2009. This was part of £2 billion worth of new facilities arranged in total.

The report suggests that this could be a significant shift and ‘should this trend continue, it is possible that funds raised through bond finance could almost equal traditional bank lending by 2010/11’.

The survey also reported that the average time taken to sell low cost homeownership units is shooting up. It has increased from 16 weeks in April 2009 to 33 weeks in the latest quarterly survey.

However, the number of unsold LCHO homes is falling. It peaked at more than 10,000 in January 2009 and now stands at 5,596.

The number of LCHO homes converted into intermediate or general needs rent has dropped from almost 5,000 in the quarter to April 2009 to just over 500 in the quarter ending 31 December 2009.

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