The National Housing Federation may act to raise the profile of housing associations with prospective lenders
The decision will be based on research the federation has commissioned into the sector's future borrowing needs and potential ways the NHF could help woo lenders.

Any action is likely to be in line with the sector-wide rebranding programme, "Housing's Better Future", currently being overseen by the federation.

The research is joint-funded by the Housing Corporation and is being led by consultant Rachel Terry, one of the founders of the Housing Finance Corporation.

She has gathered evidence from "some of the key players in the sector such as larger associations and lenders" and has examined how other sectors, such as utilities, deal with their borrowing requirements.

Terry has completed a first draft, which is being considered by the NHF national executive board. The final report will be submitted later this month.

The research comes amid growing concern that the low interest rates and charges enjoyed by associations will not be sustained because only a small number of lenders deal with the sector.

Bob Wilson, NHF policy officer, said: "There isn't a problem just now, but we're trying to find ways of looking ahead. We are considering whether or not, in the future, there may be a need for a programme to raise the profile of associations among lenders.

"We don't want to be complacent and there is always the potential for things to change, especially with Basel 2 coming in a couple of years." Basel 2 is the new code of banking conduct being worked on by the Basel Committee on Banking Supervision which comprises the national banks of 11 countries, including the Bank of England. Its recommendations include raising the amount of money that banks must set aside in order to cover their loans. Banks that lend to housing associations currently have to set aside half the total value of the loan.

Under the proposals, this could increase to 100% in 2007. The extra cost would be passed on to registered social landlords.

However, it is understood that the federation feels the impact of this will be negligible because associations represent a good investment risk – none has ever defaulted on a loan and they are regulated by the Housing Corporation. It has commissioned research from Deloitte Consulting into the potential impact of Basel 2.

Source

Housing Today