Laura Sharman 07 May 2019

Council to save £143m after ending LOBO loan

Newham Council is set to £143m after successfully terminating its Lender Option Borrower Option (LOBO) loans with NatWest bank.

The agreement will allow the council - which took out six LOBO loans with the bank in 2009 - to pay off the loans at a considerably lower rate of interest.

The mayor of Newham, Rokhsana Fiaz, said: 'Over the past ten years that the loans have been in place, it’s cost us an extra £31m in interest payments compared to borrowing from the PWLB. That’s money that should have been spent on Newham residents.

'Earlier this year, I made a promise to Newham residents that I’d make every penny count and that’s why this council filed a claim against the bank in the High Court in February. The deal that we’ve successfully nailed down today means that we’ll be saving up to £143m for Newham residents, which is a successful resolution of this litigation.'

In 2015, the Channel 4 Dispatches programme found that around 240 local authorities have taken up to £15bn in LOBO loans from private banks, which charge interest rates of more than 7% in some cases.

Research published last year showed councils could save £16bn by refinancing LOBO loans.

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