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Cambridgeshire housing association completes £50m SONIA finance deal
A Peterborough-based housing association has completed one of the sector’s first finance deals using the Sterling Overnight Index Average (SONIA) interest benchmark, securing £50m.
Cross Keys Homes (CKH) will use the funding, agreed with NatWest, to support its ambitions to build 2,900 homes by 2025.
The 12,000-home landlord joins only a tiny handful of social landlords to have leveraged finance using SONIA rules.
SONIA is a method of calculating interest rates based on transactions from the previous day.
It has become increasingly widely used after the Financial Conduct Authority (FCA) announced in 2017 that the London Interbank Offered Rate (LIBOR) method would be phased out by the end of 2021.
LIBOR is estimated daily by experts based on the rate at which banks can borrow from each other and can have forward-looking term rates.
Forward-looking rates mean borrowers can have certainty over future liabilities while SONIA-linked loans mean borrowers do not know the exact amount of interest owed until they must pay.
The FCA has described SONIA as a “robust” alternative to LIBOR that is anchored to an active and liquid underlying market.
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Riverside agreed the first exclusively SONIA-based financing deal for a housing association in April 2020, restating a £100m revolving credit facility with Lloyds Banking Group.
Metropolitan Thames Valley Housing also secured a £50m sustainability-linked loan using SONIA benchmarking from BNP Paribas in December.
Claire Higgins, chief executive at CKH, said: “With support from our long-standing partnership with NatWest, we can deliver our commitment to build good quality, affordable homes that people in the East of England want to live in.
“These will be available for everyone from families looking for affordable homes to rent to those trying to get on the housing ladder through shared ownership.
“Alongside this, we remain committed to providing housing and landlord services to our customers in our existing homes and we have maintained these services throughout the pandemic as well as conducting welfare calls with all our residents.
“Going forward, we will continue to expand our services and the number of homes available for our residents.”
Last summer, NatWest announced plans to provide the UK housing association sector with £3bn in loans over the next three years, with hopes that the money will support the development of roughly 20,000 homes.
The bank has voiced its support to the National Housing Federation’s Homes at the Heart campaign, which is calling for a “once-in-a-generation” investment in social housing as part of the response to the COVID-19 pandemic.
Dean Holleyman, director of housing finance for England and Wales at NatWest, said: “We have worked with CKH since 2004 and we are proud to facilitate one of the first SONIA-funded loans in the sector.
“CKH plays a crucial role in delivering much-needed housing and supporting communities in the East of England, and we will continue to work with the organisation as it looks to meet its housing delivery targets.”
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