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Benefits plan could push up borrowing costs

Housing associations could face increases in the cost of borrowing under the government's plan to pay housing benefit directly to social housing tenants,...
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Housing associations could face increases in the cost of borrowing under the government's plan to pay housing benefit directly to social housing tenants, the sector's biggest lender has warned.

Mark Webster, head of housing finance at Nationwide, said in an interview with Inside Housing that lenders were very concerned about the planned change, which is being piloted with private sector tenants. A social housing pilot is expected by next year.

Mr Webster, who also sits on the Council of Mortgage Lenders' social housing panel, said: ‘The pilots indicate it does increase the amount of arrears borrowers experience and that will have a knock-on impact on the strength of their cash flows.

‘It could affect lending terms if the whole funding sector sees that registered social landlords are a riskier proposition.

Because their cash flows will not be as strong, they'll need to spend more resources on recovering arrears and therefore will be less efficient.

That could then be reflected in the cost of funding going up.' Mr Webster also said that the high number of housing association mergers was changing the way they are financed.

‘We're seeing a decreasing number of RSLs with increasing financial requirements. It is consolidating loans to a small number of very large groups, and the issue that raises is how much any one lender is prepared to lend an RSL.'

See finance supplement, page 10

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