Bankers put housing associations at risk
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Bankers are using any opportunity to push up the prices of existing housing association loans, the head of the National Housing Federation has claimed.
Federation chief executive David Orr told MPs on the Communities and Local Government select committee that the problem is the single biggest threat to housing associations.
Communities and Local Government director general Richard McCarthy said he had asked the Tenant Services Authority to prepare a report on the problem, which will be shown to the Treasury.
Mr Orr also told the Communities and Local Government select committee meeting that the government should direct nationalised bank Northern Rock to provide shared ownership mortgages.
Peter Williams, executive director of the Intermediary Mortgage Lenders Association, said: ‘Because [lenders’] cost of funds has gone up so sharply the existing back book of loans to housing associations is fundamentally unprofitable, it’s losing money, compared to what the money is currently costing.
‘So the upshot is that lenders are seeking to re-price their existing back books with their existing customers when opportunities arise.’
Mr Orr said opportunities could include associations attempting to change their group structure, agree mergers, or even rescue financially troubled associations.
He added: ‘We had a private conversation recently with one of the CLG ministers where chief executives of housing associations were saying the main business risk now is lender behaviour – not in terms of new development, but in terms of existing facilities.’
Mr Orr also asked the committee: ‘If the government owns Northern Rock – if we own Northern Rock – what is wrong with a policy determination that says on a commercial basis there should be specific encouragement to Northern Rock to provide shared ownership mortgages?’
