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Paving the way

Article information Published on: October 7, 2011 Updated on: November 8, 2012 Prepared by: Suzanne Newman

Worthing Homes has borrowed £10million from the Housing Finance Corporation to fund its new house building programme.

Worthing Homes was one of seven housing associations which clubbed together to launch a £100million bond after the price of government borrowing plunged to historic low levels.

The Housing Finance Corporation took advantage of record low Gilt yields to price a brand new 32 year £100million bond at an all in cost of 5.17%.

Despite credit spreads widening significantly to 1.80%, the current expectation of a further round of Quantitative Easing (so called QE2) by the Bank of England meant that the yield of the Government Security used to price the bond was at levels last seen before World War 2. The combination of higher credit spreads but a significantly lower reference yield allowed The Housing Finance Corporation to deliver one of the lowest cost housing association sector bonds seen since before the credit crunch.