Annual Review of RSLs’ Loan Portfolios – 2025

During 2024/25, Registered Social Landlords (RSLs) operated within a highly challenging environment, shaped by the declaration of a national housing emergency, constrained public grant funding, inflationary pressures, interest rate volatility, evolving demands on their resources and policy requirements and ongoing construction and development risks. At the same time, RSLs continued efforts to maintain rent affordability for tenants, many of whom remain significantly affected by the ongoing cost of living crisis. 

As a result, RSLs continue to face considerable operational and financial pressures as they strive to deliver essential services and invest in the maintenance, improvement, and energy efficiency of existing stock. RSLs’ Governing Bodies are therefore having to make increasingly difficult decisions regarding the optimal allocation of resources. Whilst inflation and interest rate conditions were somewhat more favourable in 2024/25 compared to previous years, the broader operating environment remains unpredictable and volatile, posing ongoing risks to the delivery of RSLs’ key business plan objectives. 

Despite these challenges, two new lenders entered the sector during 2024/25, Social and Sustainable Capital and Pricoa Private Capital, alongside increased lending commitments from several existing funders. This continued investment signals confidence in RSLs and also reflects lenders confidence in the regulatory framework in Scotland, reinforcing the RSLs’ position as an attractive proposition for both traditional banks and capital market investors.   

Inflation has moderated significantly from its peak in 2022, but cost of living pressures persist - particularly for lower-income households - due to sustained increases in housing, food, and energy costs. The short to medium term inflation outlook remains uncertain, but the Office for Budget Responsibility (OBR) is forecasting a return to near the 2.0% target by mid-2026 onwards. It is worth noting that inflation in housing-related services has consistently outpaced the headline CPI. 

The Bank of England reduced interest rates in steps over the last eighteen months from 5.25% in April 2024 to 4.0% in September 2025. However, concerns remain over persistent core inflation and wage pressures, with current market consensus suggesting interest rates may be held steady for a period. 

With interest rates falling during 2024/25, the RSLs with a greater proportion of debt outstanding on variable interest rate terms will have benefited more significantly by falling interest costs, compared to those who held a greater proportion of fixed rate debt.  

RSLs with private financing needs in 2024/25 - whether for new developments, improvements, or refinancing – may have benefited from lower interest costs, as the interest rates secured on new debt could be below those assumed within their financial models. Whilst RSLs have faced rising interest costs in recent years, many benefitted from relatively low borrowing costs in the preceding decade. The recent volatility in interest costs demonstrates the importance of RSLs maintaining sufficient liquidity to manage higher interest payments and operating costs during economic uncertainty, and of retaining the confidence of current and future lenders and investors. We will continue to maintain close engagement with landlords exhibiting low liquidity or potential covenant risks to ensure appropriate oversight and support. 

• In 2024/25 RSLs had a net drawdown from available facilities after repayments of £335 million. This was 160% higher than 2023/24 (£129 million). 

• RSLs plan to increase their borrowing by an additional £1.3 billion over the next five years.  

• RSLs paid £247.3 million in interest charges in 2024/25 which represents approximately 13.9% of their income from gross rent and service charges.  

• As 70% of the debt outstanding is on a fixed rate basis and 30% on a variable interest rate, a reducing interest rate environment is less impactful for historic debt.     

• At the start of financial year 2024/25 the base rate was 5.25% falling to 5.0% by the end of July 2024, then 4.75% in early November 2024, and 4.25% at the start of February 2025. There were no further changes for the period to the end of March 2025.  

• Every 1% increase or decrease in interest rates from the 1 April 2025 could add or reduce the interest charges paid by RSLs by around £16.1 million.  

• 79% of the total value of borrowing by RSLs is from traditional sources, with 21% from capital market funding, which is the same as the previous year.  

• Undrawn facilities available to RSLs increased to £956 million at the 31 March 2025.  This is an increase of £156 million from the previous year and in conjunction with £646 million cash balances being held, means RSLs’ liquidity in aggregate remained strong.   

• Of the total loan debt outstanding at the 31 March 2025, 49% is repaid on an amortised or partially deferred basis. This helps RSLs to manage their refinancing risks.  

• In terms of debt cash repayments falling due, £158 million (2.9%) is due to be repaid in 2025/26, £201 million (3.7%) in 2026/27, £718 million (13.3%) falling due between 2027/28 and 2029/30, with the remaining balance of £4,304 million (80.1%) not due to be repaid until 2030/31 onwards.  

• During 2024/25 29 RSLs had drawn down 48 new loans compared to the 19 RSLs and 28 new loans in 2023/24.  

• These new loans ranged from £0.02 million to £85 million, totalling £563 million across 13 lenders. This is an increase of 184% compared to the £198 million arranged in 2023/24. Two new lenders entered the sector in 2024/25. 

• £237 million (42%) of these new loans were agreed on fixed interest rate terms compared to £326 million (58%) on variable interest rate terms. £191 million (34%) of the new variable rate loans are revolving credit facilities.  

• The weighted average interest rate on new fixed interest rate loans secured by RSLs in 2024/25 was 5.3%, up by 0.3% on the equivalent weighted average interest rate in 2023/24. 

• 88% of the new loans raised by RSLs were to fund affordable housing developments, with 8% for refinancing, and 2% each for both working capital purposes and other capital investment. 

In 2024/25 RSLs sourced new lending of £563 million from both traditional bank lending and capital market facilities. Traditional bank lending in 2024/25 included £266 million from the Royal Bank of Scotland, £48 million from Lloyds Group, and £32 million from Allia—together accounting for 61% of all new lending in the sector. For new capital market facilities arranged these were from Pricoa Private Capital £125 million, which is a new lender to the sector and the Pensions Insurance Corporation £25 million, these accounting for 27% of the new lending in 2024/25. For the £563 million of new loans sourced, £237 million (42%) of these were at a fixed interest rate compared to £326 million (58%) at a variable interest rate. £191 million (34%) of these new variable rate loans were revolving credit facilities.  

The total amount of outstanding borrowing increased in the last 12 months by £0.15 billion and since 2020/21 has risen cumulatively by £0.67 billion, from £4.71 billion to £5.38 billion. Reflecting the value of new facilities added in 2024/25, the total amount borrowed by the sector continues to increase. 

• At the 31 March 2024 RSLs outstanding borrowing was £5.23 billion. 

• In 2024/25, £0.413 billion was repaid with further borrowing of £0.563 billion, with 88% of this used for affordable housing developments. 

• At the 31 March 2025 RSLs outstanding borrowing was £5.38 billion. 

Of the total value of available facilities of £7,180 million in 2024/25, ten capital market investors provide a total of £1,569 million. This comprises 26 individual bond agreements across 13 RSLs, with £225 million of new facilities being made available in 2024/25 with £60 million having been repaid, resulting in a net increase of £165 million during 2024/25. The combined bond and capital markets investment is the sector’s second largest source of funds, with the proportion of capital market funding held by RSLs having increased by almost 50%, from 15% of the total debt facilities at March 2019, to 22% at the 31 March 2025. 

As mentioned previously there were two new lenders to the RSL sector in 2024/25 one of which has been categorised under traditional bank lender above and the other categorised under capital market investors, namely Pricoa Private Capital, with details of the facility advanced included within the table below.  

The table below summarises facility values by capital market investors and the net change year on year. 

Overall, for all lending including both traditional bank lenders and capital market investors, reflecting both new loan facilities and facilities fully repaid in year and falling off the list, there was a net increase of £335 million.  

Environmental, Social and Governance (ESG)-linked loans have become increasingly prevalent within the Scottish social housing sector, with some RSLs utilising them for both financing and refinancing purposes. The sector’s strong ESG credentials may attract new lenders and investors. While these loans can offer discounted borrowing rates, they may also incur additional costs related to governance, monitoring, and reporting against agreed sustainability targets.  

In 2024/25, RSLs’ obtained lending of £53.4 million which included beneficial lending terms linked to the RSL’s sustainability performance targets with the funds supporting the delivery of new affordable housing and refinancing.   

Every investment and financial product carry some degree of risk dependent on several factors such as the amount required, market conditions and lender appetite. Mark-to-market exposure on derivatives remains low. However, some RSLs still have loans incorporating a derivative arrangement, the most common allowing them to ‘swap’ a variable interest rate for a fixed interest rate. Many are ‘embedded’ within the loan agreement, with 12 ‘stand-alone’ contracts in place between the RSL and the lender at the 31 March 2025, which is the same as 2023/24 levels. 

In 2024/25, £563 million of new loans were arranged by RSLs which is 184% more than the £198 million borrowed in 2023/24.  With 48 new loan agreements, this is 20 more when compared to the 28 new loan agreements set up in 2023/24. These funds by value being used for  

• affordable housing development (88.0%).  

• refinancing (8.0%). 

• capital investment (1.7%).  

• working capital purposes (2.3%). 

RSLs may classify their new loans as refinancing, however due to the nature of the treasury management structure in place for cashflow, where all funds are held centrally, a proportion of this may indirectly relate to affordable housing development or capital investment in existing properties.   

This indicates that on average RSLs continue to make effective use of their properties as support for their borrowing. Secured property is valued at approximately £9.20 billion, which represents 128% of the facilities available to RSLs.

Expenditure on interest costs was £247.3 million in 2024/25. This represented approximately 13.9% of landlords’ income from gross rent and service charges. 

The new deals secured in 2024/25 had the usual broad range of interest rates, being either traditional fixed interest rate loans or variable interest rate loans referenced to SONIA or the Base rate. The table below summarises the interest rate margins secured on new loans in 2024/25.  

For the 32 new variable rate loans, the expectation is that interest rates on offer will have fallen during 2024/25 due to the decrease in the underlying reference rate (Base rate & SONIA) although the margin applied to the reference rate by lenders will impact the overall benefit. The above table shows the margin which is applied to the underlying rates. During 2024/25 the margins applied to underlying rates for 19 new loans referencing SONIA ranged between 1.0% to 1.75% (2023/24: 0.9% to 1.6%) whilst for the 13 new loans referencing the Base rate loans it was between 1% and 1.8% (2023/24: 1% and 1.6%).    

The interest rates secured by RSLs, including the margins on reference rates on new borrowing can be influenced by a number of factors. These include the size of the loan, the repayment profile, the term to maturity, the risk profile of the RSL and the sector as assessed by individual lenders as well as the availability of funds from potential lenders. 

For the 16 new fixed interest rate loans sourced during 2024/25 1 was on an interest free basis, 6 were secured at an interest rate of less than 5.0%, 5 RSLs secured interest rates of between 5.00% and 5.65%, with the 4 remaining loans securing an interest rate of above 5.65%. Overall, the weighted average interest rate on new fixed interest rate loans sourced was 5.3%. This is a 0.3% uplift on the equivalent weighted average interest rate for new fixed rate loans in 2023/24 which was 5.0%.  

Although the base rate began to ease in 24/25, fixed rate loans are priced on future expectations including funding costs, inflation forecasts and central bank policy, and the lender expectations may have been that rates would remain higher for longer than previously thought so may have built this in when offering their fixed rate products and thus the higher average rate on new fixed rate borrowing in 24/25.  

Fixed interest rates offer RSLs certainty over future debt repayments, helping them plan their spending more confidently—especially since rental income tends to be stable. However, fixed-rate loans often come with higher costs compared to variable rates. In contrast, variable interest rate loans can be cheaper but carry more uncertainty about future payments. To balance these risks, RSLs have traditionally used a mix of both fixed and variable rate borrowing. 

In 2024/25, £237 million (42%) of new loans were at a fixed interest rate compared to £326 million (58%) at a variable interest rate. When seeking new loans, RSLs should carefully consider their existing debt structure—particularly the balance between fixed and variable interest rate borrowing—given ongoing uncertainty in interest rates. Their approach should reflect their appetite for interest rate risk and ensure the overall debt profile remains within the limits set by the Governing Body’s approved treasury policy. Including variable rate options, such as revolving credit facilities, can offer greater flexibility for future refinancing. 

As of 31 March 2025, 70% of total outstanding loan debt in the sector was on fixed interest rates or bond equity, while 30% was on variable interest rates—a split that remains broadly consistent with previous years. Since interest charges on variable-rate debt can fluctuate with changes in market rates, it is essential that Governing Bodies understand how such movements could affect their overall borrowing costs. 

Adopting high level assumptions and based on the variable interest rate debt outstanding and the prevailing reference interest rate at the 31 March 2025 (i.e. primarily Base rate or SONIA), a 1% uplift in interest rates would result in an increase in the estimated annual interest charges of £16.1 million.  

10% of loans held by RSLs are fully amortising i.e. repaid in instalments across the full term of the loan. 

39% of loans have a form of partial deferral e.g. an interest only arrangement for a period before they start making regular capital repayments, or bullet repayments at set points throughout the loan term.  

51% of loan debt outstanding is fully deferred, with no scheduled capital repayments until the end of the loan term, when the debt may be repaid, or alternatively refinanced with another loan.  

The above debt repayment profile is based on when the loan is fully repaid. The table below provides analysis based on the actual debt repayments profile in cash terms, per the loan agreements. The table below provides an indicator of the refinancing risks for RSL’s in aggregate in the short to medium term.