The bank yesterday made the first issue of pounds 100m of long-term borrowings to eight associations. The 25-year debt is fixed at an interest rate of 10.03 per cent. Some pounds 5m of the issue will be invested in gilts - the 8.75 per cent Treasury stock that expires in 2017 - to cover the possibility of defaults by borrowers.
Adrian Bell, a director at Hambros, said the facility made more sense for housing associations, which have been paying uneconomic premiums on short-term loans from other sources. Associations receive 70-80 per cent of their funds in the form of grants from the Government.
The fund will be handled by a new company, Funding for Homes, with three independent directors - Gerald Leahy, chairman of the Association of Corporate Treasurers, Donald Main, finance director at Forte, and David Malcolm, former chief investment officer at Royal Insurance.
Access to the funding scheme is restricted. Only the top 50 associations, which have more than 5,000 homes under management, can apply for money. The associations must also be members of the Housing Corporation and there can be no more than 25 borrowers at any time.
The first eight include London and Quadrant Housing Trust, Merseyside Improved Homes, Sanctuary Housing Association, and Paddington Churches Housing Association.Reuse content