Housing associations have put up “tens of millions” in additional security to banks as a result of financial turmoil following the EU referendum.
After the vote for Brexit, the Homes and Communities Agency (HCA) warned that cash calls as a result of falling borrowing costs were the “most immediate risk” to social landlords.
According to Inside Housing:
“With government gilt rates falling to historic lows of below 1%, associations were required to provide millions in additional security at the end of last month.
It is understood they met these commitments without difficulty, offering cash and property as security to banks.
Many housing associations have struck swap deals to agree a fixed rate rather than a variable interest rate on long-term loans. But when rates fall, landlords must put up additional security to cover the gap between the variable and fixed rate – known as ‘mark to market exposure’.
The tumbling rates triggered by the uncertainty which followed the referendum sent rates plunging to all-time lows, and led to calls for security by banks.”