Costs of a Home Building Fund loan, accessible version
Updated 9 April 2025
Applies to England
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The [Home Building Fund] is administered by Homes England and provides recoverable investments in the form of commercial loans.
Loans will have an appropriate interest rate and an arrangement fee will be payable. As a public body, all loans provided by Homes England are subject to European State Aid rules.
Interest rates will therefore be applied to the loan in accordance with the European Commission’s guidance.
Lending decisions will be made by Homes England and their decision is final. Lending decisions including quantum and structure of the financing will be offered by the Homes England on the basis of our appraisal of the proposal. The interest rate which will be payable has two elements, a base rate and a margin.
The base rate will be the prevailing Bank of England Bank Rate, this rate is variable. An appropriate margin will be offered based on an assessment of the risk of the loan, taking into account the creditworthiness of the applicant, nature of the investment and collateral offered. This rate will typically be fixed.
Creditworthiness
Homes England can use credit scores from a recognised credit rating agency to support the creditworthiness assessment process.
Where an applicant does not have an external rating, we will carry out an assessment of financial standing and the risks associated with lending to the business and the project.
Collateralisation
Collateralisation is based on the security offered for the loan and the amount Homes England could expect to recoup in the event of default.
We will require satisfactory demonstration of an ability to repay and adequate security, usually in the form of property assets.
Security can typically be provided as a first ranking charge over property, debentures over companies or non-property related security such as capital guarantees from a suitable parent company.
Normal collateralisation will be judged by clear demonstration of satisfaction with these requirements. Other forms of security such as second ranking charges over property will be considered.
Should the security offered justify a different categorisation, this will be reflected in the margin offered.
Margin matrix
The table shows the minimum margin available on our assessment of the creditworthiness of the applicant and the collateral offered to support the loan.
| Creditworthiness | Collateralisation | ||
|---|---|---|---|
| Medium risk | Medium risk and or High risk | High risk | |
| Strong | 0.60% | 0.75% | 1.00% |
| Good | 0.75% | 1.00% | 2.20% |
| Satisfactory | 1.00% | 2.20% | 4.00% |
| Weak | 2.00% - 4.00% | 3.00% - 5.00% | 4.50% - 6.00% |
| Financial difficulties | 4.00% - 6.00% | 5.00% - 8.00% | 6.00% - 10.00% |