London Daily

Focus on the big picture.
Thursday, Oct 16, 2025

Council borrows £18m to pay 'toxic' £10m loan

Northamptonshire County Council took out the loan with The Royal Bank of Scotland in 2010.

A cash-strapped council borrowed £18m to exit a "toxic" £10m loan deal.

Northamptonshire County Council took out the Lender Option Borrower Option (LOBO) loan with The Royal Bank of Scotland in 2010.

Earlier this month the authority's draft budget for 2020-21 contained £23.2m of cuts.

The cost of ending the deal early is being kept confidential but the council said it provided it "the opportunity to 'lock in' interest cost savings".

Many councils took out LOBO loans due to their starting interest rate being lower than those offered by the government backed Public Works Loan Board (PWLB).

But lenders are able to increase future rates of interest at a pre-determined date.

These loans have been described by the campaign group Debt Resistance UK as "toxic" and "risky".


What is a LOBO Loan?

Lobo loans are typically long-term loans ranging in length from 40 to 70 years.

The lender has the option to increase the rates at fixed points in the loan term (lender option dates).

The borrower must then either repay the loan plus a penalty fee, or move on to the higher rate of interest.

Lobos typically offer the borrower a low "teaser" interest rate for the first few years of the loan, to attract custom.

Source: House of Commons Library

The interest rate of Northamptonshire's LOBO loan with RBS, which was due to mature in 2060, rose to 7.72%.

The terms of RBS's contract with the council state that under certain market conditions the exit costs could have exceeded the loan amount.

According to cabinet papers, the council decided to re-finance by borrowing £18m off the PWLB at a significantly lower rate to achieve a better deal in the long term.

Nicholas Dunbar, senior consultant at corporate treasury advisers Vedanta Hedging, said "Northamptonshire was paying 7.72% in interest on the LOBO which it was legally obliged to pay for the next 40 years.

"Over that timescale, paying 2% on £18m is preferable to paying 7.72% on £10m."

A spokesman for Northamptonshire County Council said: "The £18m borrowed included the replacement of the £10m LOBO loan finance and its associated premium cost, as well as an additional provision to meet the council's overall borrowing requirements.

"The decision to borrow, including the timing and amount, was based on our overall cash flows and investment balances at the time, the current and forecast outlook for borrowing rates and the opportunity to 'lock in' the interest cost savings from a lower fixed-rate loan against the higher variable-rate loan that was settled early."

Newsletter

Related Articles

0:00
0:00
Close
Yachts, Private Jets, and a Picasso Painting: Exposed as 'One of the Largest Frauds in History'
Australia’s Wedgetail Spies Aid NATO Response as Russian MiGs Breach Estonian Airspace
McGowan Urges Chalmers to Cut Spending Over Tax Hike to Close $20 Billion Budget Gap
Victoria Orders Review of Transgender Prison Placement Amid Safety Concerns for Female Inmates
U.S. Treasury Mobilises New $20 Billion Debt Facility to Stabilise Argentina
French Business Leaders Decry Budget as Macron’s Pro-Enterprise Promise Undermined
Trump Claims Modi Pledged India Would End Russian Oil Imports Amid U.S. Tariff Pressure
Surging AI Startup Valuations Fuel Bubble Concerns Among Top Investors
Australian Punter Archie Wilson Tears Up During Nebraska Press Conference, Sparking Conversation on Male Vulnerability
Australia Confirms U.S. Access to Upgraded Submarine Shipyard Under AUKUS Deal
“Firepower” Promised for Ukraine as NATO Ministers Meet — But U.S. Tomahawks Remain Undecided
Brands Confront New Dilemma as Extremists Adopt Fashion Labels
The Sydney Sweeney and Jeans Storm: “The Outcome Surpassed Our Wildest Dreams”
Erika Kirk Delivers Moving Tribute at White House as Trump Awards Charlie Presidential Medal of Freedom
British Food Influencer ‘Big John’ Detained in Australia After Visa Dispute
ScamBodia: The Chinese Fraud Empire Shielded by Cambodia’s Ruling Elite
French PM Suspends Macron’s Pension Reform Until After 2027 in Bid to Stabilize Government
Orange, Bouygues and Free Make €17 Billion Bid for Drahi’s Altice France Telecom Assets
Dutch Government Seizes Chipmaker After U.S. Presses for Removal of Chinese CEO
Bessent Accuses China of Dragging Down Global Economy Amid New Trade Curbs
U.S. Revokes Visas of Foreign Nationals Who ‘Celebrated’ Charlie Kirk’s Assassination
AI and Cybersecurity at Forefront as GITEX Global 2025 Kicks Off in Dubai
DJI Loses Appeal to Remove Pentagon’s ‘Chinese Military Company’ Label
EU Deploys New Biometric Entry/Exit System: What Non-EU Travelers Must Know
Australian Prime Minister’s Private Number Exposed Through AI Contact Scraper
Ex-Microsoft Engineer Confirms Famous Windows XP Key Was Leaked Corporate License, Not a Hack
China’s lesson for the US: it takes more than chips to win the AI race
Australia Faces Demographic Risk as Fertility Falls to Record Low
California County Reinstates Mask Mandate in Health Facilities as Respiratory Illness Risk Rises
Israel and Hamas Agree to First Phase of Trump-Brokered Gaza Truce, Hostages to Be Freed
French Political Turmoil Elevates Marine Le Pen as Rassemblement National Poised for Power
China Unveils Sweeping Rare Earth Export Controls to Shield ‘National Security’
The Davos Set in Decline: Why the World Economic Forum’s Power Must Be Challenged
France: Less Than a Month After His Appointment, the New French Prime Minister Resigns
Hungarian Prime Minister Viktor Orbán stated that Hungary will not adopt the euro because the European Union is falling apart.
Sarah Mullally Becomes First Woman Appointed Archbishop of Canterbury
Mayor in western Germany in intensive care after stabbing
Australian government pays Deloitte nearly half a million dollars for a report built on fabricated quotes, fake citations, and AI-generated nonsense.
US Prosecutors Gained Legal Approval to Hack Telegram Servers
Macron Faces Intensifying Pressure to Resign or Trigger New Elections Amid France’s Political Turmoil
Standard Chartered Names Roberto Hoornweg as Sole Head of Corporate & Investment Banking
UK Asylum Housing Firm Faces Backlash Over £187 Million Profits and Poor Living Conditions
UK Police Crack Major Gang in Smuggling of up to 40,000 Stolen Phones to China
BYD’s UK Sales Soar Nearly Nine-Fold, Making Britain Its Biggest Market Outside China
Trump Proposes Farm Bailout from Tariff Revenues Amid Backlash from Other Industries
FIFA Accuses Malaysia of Forging Citizenship Documents, Suspends Seven Footballers
Latvia to Bar Tourist and Occasional Buses to Russia and Belarus Until 2026
A Dollar Coin Featuring Trump’s Portrait Expected to Be Issued Next Year
Australia Orders X to Block Murder Videos, Citing Online Safety and Public Exposure
Three Scientists Awarded Nobel Prize in Medicine for Discovery of Immune Self-Tolerance Mechanism
×