The latest Public Works Loan Board (PWLB) lending figures for October 2026 indicate a continued preference among local authorities for shorter-term borrowing, alongside a notable increase in the proportion of loans being taken on an Equal Instalments of Principal (EIP) basis.
A total of £1.73 billion was advanced during the month, representing an increase of approximately 44% on September’s lending. The weighted average term of new fixed-rate borrowing was just 2.2 years, highlighting the continued reluctance of many authorities to commit to longer-term borrowing at prevailing interest rates.
A preference for shorter-term borrowing
Maturity loans continued to account for the largest proportion of new lending, representing approximately 64% of advances when both fixed and variable-rate maturity loans are included.
However, EIP lending accounted for a substantial 33% of total advances, with £576 million borrowed using this repayment structure. Annuity loans remained relatively uncommon, representing just 2% of lending.
The increased use of EIP loans is particularly interesting. Unlike traditional maturity borrowing, EIP loans progressively repay principal throughout their term, reducing the outstanding debt balance and the associated interest cost over time. This may appeal to authorities seeking to manage future refinancing requirements and reduce exposure to refinancing risk.
Borrowing costs remain elevated
The weighted average interest rate on new fixed-rate lending was approximately 5.33% during October.
With borrowing costs remaining relatively high, the average term of just over two years suggests that authorities continue to favour flexibility over locking into longer-term interest rates.
There was also a noticeable return to variable-rate borrowing, with £85 million advanced during October. Although this represented less than 5% of total lending, it is an area worth monitoring as authorities consider the balance between fixed-rate certainty and the potential benefits of shorter-term or variable-rate exposure.
Concessionary rates continue to play an important role
The availability of concessionary PWLB rates continues to have a significant influence on local authority borrowing.
Of the £1.73 billion advanced during October:
• £1.19 billion (69%) was advanced at the Certainty Rate, providing a 20 basis point discount against the standard PWLB rate.
• £529 million (31%) was advanced at the Housing Revenue Account (HRA) Rate, which provides a 60 basis point discount against the standard rate.
• Only approximately £12 million was advanced without a concessionary discount.
HRA borrowing therefore represented a particularly significant proportion of monthly lending, reflecting the continued importance of PWLB funding in supporting local authority housing investment, the recent Budget announcement to extend this discount should be viewed positively by the sector.
What does this tell us?
October’s figures reinforce several important themes in local authority treasury management.
Firstly, authorities appear reluctant to lock into longer-term borrowing at current interest rates, with the average term of new fixed-rate lending remaining relatively short.
Secondly, the increased proportion of EIP borrowing suggests that authorities are giving greater consideration to the repayment profile of their debt, rather than focusing solely on the headline interest rate.
Finally, concessionary borrowing continues to be extremely important, with almost all lending benefiting from either the Certainty Rate or HRA Rate.
For treasury managers, the challenge remains balancing the cost of borrowing today against longer-term interest rate uncertainty, refinancing risk and the authority’s wider capital financing requirements.
These figures highlight the importance of taking a strategic approach to borrowing decisions. The choice between maturity, EIP and annuity structures, alongside the appropriate balance of fixed and variable-rate borrowing, can have a material impact on an authority’s long-term debt profile and overall financing costs.
If you require support with your authority's borrowing strategy, including debt affordability assessments, borrowing options or the timing of new borrowing, please contact the Arlingclose team at treasury@arlingclose.com to discuss how we can assist.
