Summary of the Annual Loan Portfolio Returns at 31 March 2021

Our annual analysis of RSLs' annual loan portfolio returns.


02 December 2021


02 December 2021

Key messages and highlights from 2020/21 returns

As total investment in the Scottish social housing sector increases to in excess of £6.4 billion, the continuing commitment of many long standing investors represents a considerable vote of confidence in the sector and how it is managed, governed and regulated.

  • 41 different RSLs took out 66 new loans in 20/21, ranging from £137,000 to £60 million, and totalling more than £660 million across 17 different lenders.
  • Total investment in the Scottish social housing sector now exceeds £6.4 billion.
  • 20% of all lending continues to come from the bond and capital markets.
  • A Scottish Government commitment to deliver 110,000 affordable homes by 2032 is in place and RSLs will have a major contribution to make towards meeting this target. The majority of new loans to RSLs have funded and will continue to fund the construction or acquisition of many of these affordable homes and the raising of further private finance will be necessary.
  • 78% of new loans were raised to fund affordable housing development.
  • Despite a less active year and the smallest sector wide draw down since 16/17, 20/21 still saw a net draw down from available facilities, after repayments, of £185 million.
  • Available undrawn facilities increased to £1.05 billion. This, along with increased cash balances means sector liquidity remains strong, with funding in place to help RSLs manage increased spending on catch up repairs due to the pandemic, maintaining existing stock and decarbonisation.

How much debt do RSLs have?

  • In 20/21 the total value of facilities made available increased by 3.8% to £6.41 billion;
  • The net amount drawn down increased by £185 million to £5.36 billion;
  • The total o/s loans balance at the year-end increased by 4.1% to £4.71 billion;
  • The average amount owed per home increased to £15,500; and
  • The total amount drawn down is forecast to exceed £6.3 billion by the end of 25/26

Total facilities and outstanding balances at March in recent years were:

  • 16/17 - facilities £4.91 billion, o/s balance £3.73 billion
  • 17/18 - facilities £5.24 billion, o/s balance £3.92 billion
  • 18/19 - facilities £5.97 billion, o/s balance £4.15 billion
  • 19/20 - facilities £6.18 billion, o/s balance £4.52 billion
  • 20/21 - facilities £6.41 billion, o/s balance £4.71 billion

How has RSL debt changed?

The total amount of outstanding borrowing has increased by more than £1.10 billion, from £3.56 billion to £4.71 billion, since 2015. Despite another relatively small increase in the value of new facilities added in 20/21, the total amount borrowed by the sector continues to increase

  • At March 2020 o/s borrowing was £4.52 billion;
  • During 20/21 RSLs repaid £0.47 billion;
  • And borrowed a further £0.66 billion, the majority of which will fund affordable housing development;
  • At March 2021 o/s borrowing was £4.71 billion

Who lends to RSLs?

Thirty seven different lenders and investors help fund the sector via more than 1,300 loans, to which more than 2,100 covenants attach.

The three largest lenders manage 57% of all available facilities between them, and the net amount they made available in 20/21 increased by £244 million, or 7.2%, from £3.40 billion to £3.64 billion. The proportion of RSL debt managed by each is:

  • Royal Bank of Scotland (RBS) – 37%
  • Lloyds Group – 10.5%
  • Nationwide Building Society – 9.5%

Some of this debt is provided across a syndicate of lenders, but most is on a sole lender basis.

  • RBS lend £1.68 billion, and a further £709 million as syndicate lead, a total of £2.38 billion;
  • Lloyds Group lend £585 million, and a further £85 million as syndicate lead, a total of £670 million; and
  • Nationwide Building Society lend £590 million, all as sole lender

RBS remains the largest lender, having further consolidated its position in 20/21, and although the Lloyds Group and the Nationwide Building Society saw another marginal drop in market share they still retain their places as second and third largest individual lenders to the sector.

Allia, the Charities Aid Foundation Bank and GB Social Housing all increased their lending to the sector in 20/21, putting a further £44 million in place between them. The sector also retains a number of specialist lenders that lend to particular types of organisations (e.g. charities) or for specific purposes (e.g. environmental projects).

The total value of all facilities in 20/21 was £5.19 billion, representing a net increase of £239 million or 4.6% on 19/20. The table below summarises facility values by lender.

Lender 2021 2020 Change Change
  £m £m £m %
Royal Bank of Scotland plc 2,385 2,106 279 11.7%
Lloyds Group 670 700 -30 -4.5%
Nationwide Building Society 590 595 -5 -0.8%
European Investment Bank 289 289 0 0.0%
Allia 209 193 15 7.4%
Santander 174 215 -41 -23.6%
Clydesdale Bank plc 162 169 -7 -4.3%
The Housing Finance Corporation 156 153 3 1.9%
GB Social Housing 112 94 18 16.1%
HSBC 100 100 0 0.0%
Barclays 86 86 0 0.0%
Charities Aid Foundation Bank 52 41 11 21.1%
Triodos Bank 45 45 0 0.0%
Unity Trust Bank 30 24 7 21.5%
Handelsbanken 25 25 0 0.0%
Local Authority 20 20 0 0.0%
Affordable Housing Finance 17 17 0 0.0%
Scottish Building Society 15 15 -0 -0.7%
Co-operative Bank PLC 14 30 -16 -111.6%
Energy Savings Trust 13 9 5 33.9%
Scottish Government 13 13 -0 -0.3%
Charity Bank Ltd 7 6 1 10.6%
Leeds Building Society 2 2 0 0.0%
Other 2 2 0 0.9%
Total 5,189 4,950 239 4.6%

Although 20/21 saw no increase in funds raised through bonds and private placements, the combined bond and capital markets investment remains the sector’s second largest source of funds, with eight investors making a total of £1.22 billion available to more than 20 RSLs. More detail on this funding can be found in the table below.

Lender 2021 2020 Change Change
  £m £m £m %
Own named bond 330 330 0 0.0%
M&G 214 214 0 0.0%
Canada Life 205 205 0 0.0%
MetLife 175 175 0 0.0%
Black Rock 150 150 0 0.0%
Sun Life 70 70 0 0.0%
Pension Insurance Corporation 40 40 0 0.0%
Scottish Widows 40 40 0 0.0%
Total 1,224 1,224 0 0.0%

With RSLs now also considering Environmental, Social & Governance (ESG) investments, this may attract new lenders and investors to the sector. This type of lending has the potential to introduce lower interest rates, however it also tends to bring with it new accountabilities. There can be extra costs associated with reporting against targets and RSLs should be aware of this.

What type of private finance do RSLs have?

74% of RSLs outstanding debt remains traditional borrowing, with 26% sitting with investors from the bond and capital markets.

  • The total amount of traditional lending available increased by 4.8% to £5.19 billion, with the o/s balance up 5.5% to £3.49 billion
  • The total investment from the capital markets remained at £1.22 billion, with the bullet repayment structure of the loans keeping the o/s balance at £1.22 billion

While the percentage of debt sourced from the bond and capital markets had increased rapidly in recent years, the tables above show that most debt still remains with the traditional lenders.

The London Interbank Offered Rate (LIBOR) that underpins many financial and non-financial contracts is being retired in December 2021. With 38% of all loans referencing LIBOR, RSLs should already be taking appropriate action to transition to an alternative reference rate.

The value of revolving credit facilities dropped in 20/21. Having increased by £100 million between 18/19 and 19/20, the outstanding balance at March 2021 had fallen 26% to £219 million. RSLs should continue to be mindful of the potential refinancing risk attached here as they will likely find themselves needing to re-tender, or at least re-negotiate, on a more frequent basis.

The table below shows the outstanding balance on the variety of loan types held by RSLs.

Loan Type 2021
Bond/capital market product 1,224
Development overdraft 4
Fixed rate loan 2,114
Fixed with embedded interest rate swaps 94
Fixed without embedded interest rate swaps 9
Revolving loan/facility 219
Variable rate loan 982
Variable with embedded Interest rate swaps 60
Total 4,706

All financial products carry a certain degree of risk. It is critical that Governing Bodies ensure they are operating within a coherent treasury management strategy that is appropriate for their business plan and that the financial products they choose are the correct ones for the RSL. We would expect RSLs to seek advice where appropriate, and for that advice to be both impartial and independent.

Some RSLs have loans incorporating a derivative arrangement, the most common allowing them to ‘swap’ a variable interest rate for a fixed rate. Many are ‘embedded’ within the loan agreement, some are ‘stand-alone’ deals between RSL and lender. This form of borrowing has proved less popular in recent years, with the 28 contracts in place at March 2015 having reduced to just 18 at March 2021.

Whilst SHR does not support one form of borrowing over another, we do expect Governing Bodies to have the necessary internal controls in place to reflect how they will monitor covenant compliance, and to possess the necessary skills and experience to allow them to understand and effectively challenge any advice given concerning the financial products they select. The importance of managing relationships and communications with funders remains vital. Governing Bodies must have an effective approach to treasury management in place in order to ensure their organisation is compliant with Regulatory Standard 3.

What new borrowing have RSLs undertaken?

20/21 saw £663 million of new loans arranged by RSLs. This was down 17% on the £802 million borrowed in 19/20 and 66 new loan agreements is a 44% drop from 118 in 19/20.

  • 81% by value of these new loans will fund affordable housing development or ongoing investment in existing properties;
  • 14% refinancing; and
  • 5% other purposes

RSLs are using 72% of their housing stock as security for borrowing, leaving 28% unencumbered. This is up from 68% in 19/20 and reflects the increased borrowing in 20/21 as well as demonstrating that RSLs continue to make use of their properties as support for their borrowing. Secured property is now valued at approx. £7.05 billion, around 110% of all funds available.

How much does borrowing cost RSLs?

Increased annual interest charges of £214m represented 17% of RSLs income from rent and service charges. Average rates experienced in 20/21 were 3.40% fixed and margins of 1.35% and 1.72% over 3 month LIBOR and Base respectively.

The new loan deals secured in 20/21 were almost all as either traditional fixed or variable rate loans. However they did show a different pattern to the general ‘all loans’ picture with a swing away from fixed rates to variable rates referencing 3 month LIBOR in particular. The table below summarises all the rates and margins secured in 20/21. They show little marked change in Base and fixed rates from 19/20, which was arguably to be expected given the lack of activity in the Bank of England Base rate. The margins secured on new variable rate borrowing were marginally up on 19/20.

2021 Loan Amount No. loans Lower Quartile Median Upper Quartile
Base 29.1 10 1.60% 1.60% 1.64%
Fixed rate percentage 333.5 27 2.19% 2.84% 4.43%
3 month LIBOR 296.8 25 1.10% 1.50% 1.60%
Interest free 0.4 3 - 0.00% -
Lenders mortgage base rate 2.8 1 2.10% 2.10% 2.10%
Total 662.6 66      

Fixed rates provide certainty on debt servicing costs. With rental income a relatively certain figure this should allow RSLs to better forecast future expenditure, hopefully knowing they will be able to cover interest payments. However, they can also expect fixed rate borrowing to come at a price as in general those rates are likely to be higher than variable rates.

Conversely, while generally providing cheaper borrowing, variable rate loans do not bring the same future certainty on interest payments and RSLs have traditionally taken a mix of fixed and variable rates in order to mitigate the corresponding risks attached to each.

In late 2021 CPI inflation rose to 4.2%, its highest level for around 10 years, and with that came speculation on the likelihood of a first interest rate rise since the Bank of England dropped its Base rate to 0.1% at the start of the pandemic. Governing Bodies must ensure they understand how any movement in interest rates can impact on costs and again RSLs will benefit from having a coherent treasury strategy, consistent with their Business Plan.


When will RSLs repay their debt?

Many loans held by RSLs are fully amortising i.e. repaid in instalments across the full term of the loan. Others have some form of deferral e.g. interest only for a period before regular capital repayments start, or bullet repayments at set points throughout the loan term. Some are fully deferred, with no capital repayments until the end of the loan term, when the debt may be repaid, or alternatively refinanced with another loan. It is therefore difficult to provide a definitive debt repayment profile.

The table below shows the remaining life of all existing loans, split into three distinct groups as determined by the repayment profile.

£m / Years 0-5 5-10 10-15 15-20 20-25



Fully Deferred

107.64 316.32 316.33 404.78 439.51 482.83 2,067.41
Partially Deferred 55.19 288.60 183.47 426.81 830.54 188.14 1,972.75
Fully Amortised 26.64 116.22 147.40 176.00 179.62 20.13 666.01
Total 189.47 721.14 647.20 1,007.59 1,449.67 691.10 4,706.17
Percentage 4.0% 15.3% 13.8% 21.4% 30.8% 14.7%  
Total 2020 286.80 751.10 614.10 991.33 1,377.24 502.09 4,522.65
Percentage 2020 6.3% 16.6% 13.6% 21.9% 30.5% 11.1%  


Glossary of terms



Affordable Housing


Includes social/mid-market rented and shared equity/ownership, provided to specified eligible households with needs not met by the market. It can be new-build or a private sector property purchased for use as an affordable home.



Debt instrument where an investor lends to an entity, borrowing funds for a defined period of time.

Capital Expenditure


Expenditure to acquire or improve a long-term asset. Includes new build development and component replacement, such as kitchens, bathrooms, roofs etc.



Security with price dependent on/derived from underlying asset. A contract between two or more parties based upon the asset, its value determined by fluctuations in the asset. Most commonly a mechanism to swap a variable interest rate for a fixed rate.



Overarching agreement with a lender to draw an arranged amount of funding, perhaps over a period of time, and perhaps with a number of separate loans with similar or different t’s & c’s.

Fixed Interest Rate

Rate that remains the same, either for the entire loan term or for a pre-arranged part of that term.



London Interbank Offered Rate. Benchmark rate the banks charge each other for short-term loans.  3 month LIBOR the most common maturity.

Loan Facility


Credit arrangement through which a person or organisation can borrow up to an agreed amount.

Maturity Date


Final payment date of a loan, or other financial instrument, at which point the principal (and any remaining interest) is due to be repaid.

Private Placement


Debt instrument where an investor lends for a defined period of time, as opposed to a bond sold through a public offering.



Generally, heritable security over property allowing lender to use proceeds from sale of property to meet a liability, should borrower fail to meet repayment obligations, similar to that exercisable with a mortgage on a private home.



Some RSLs have loans from syndicates, where funds from more than one lender are aggregated and managed by a single lead lender.

Treasury Management

A policy governing the way an organisation manages its borrowing and investments.

Undrawn amount


The agreed funding within a facility yet to be drawn down.

Variable Interest Rate


Rate that can fluctuate over time as based on an underlying benchmark rate or index that can change periodically.