Four HAs take government-guaranteed debt at below 2% from European Investment Bank
Four associations are among the last to secure government-guaranteed debt from the European Investment Bank (EIB).
The UK government-backed aggregator, Affordable Housing Finance (AHF), said it had priced all four transactions at below 2 per cent.
The Department for Communities and Local Government confirmed in November 2015 that it would close the £3.5bn Affordable Homes Guarantees Programme to new applications March 2016. However the pipeline of credit approved deals has continued throughout this year. AHF expects to complete over £3.2bn of funding by the time it finishes.
In the latest deal, announced last week, Golding Homes secured £51.5m of long-term finance at a fixed rate of 1.791 per cent, which AHF said was 4 basis points below the UK government’s own cost of finance.
The Kent association, which plans to use to build more affordable homes and enhance its community support, will be able to draw down the agreed funding on the 19 December 2017.
The Golding announcement follows news of three further loans in the previous week.
Family Mosaic, which is merging with Peabody, has borrowed £50m of EIB funding at a floating rate of 6 Month Libor + 0.178 per cent.
The funding, which will be drawn down on 14 December 2017, will support the G15 landlord’s pledge to build 1,000 new homes per annum.
AHF has also priced £25m of EIB funding for Stonewater at a fixed rate of 1.867 per cent, which was +0.017 per cent above the 20-year gilt rate.
And AHF has agreed £20m of EIB funding at a fixed rate of 1.873 per cent for Gateway, a 2,800 home association which predominantly operates within East London and plans to build 500 new homes by 2020.
Piers Williamson, chief executive of AHF, said the pricing on all four deals was ‘significantly inside’ the spreads being achieved by housing associations on standalone bonds.
“This comparison highlights the low-cost structure of AHF’s EIB financing and its ability to outprice other sector issuances. It’s just a shame all good things have come to an end.”
John Bruton, executive finance director of Stonewater said the loan will “contribute to us building over 300 affordable rent and home ownership units in locations across the South West, Midlands and East of England”.
“While we also use other sources of finance, the very low interest rate we have secured from EIB means we can do more to meet the huge housing need that exists than if we only had access to commercial loans”.
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