UK local authorities can borrow from central government at cheap rates and on favourable terms. However, some councils also borrow from private banks.

Until recently, bank debt for councils came in the form of LOBO loans – expensive and high risk loans.

LOBO loans are expensive, as they are usually very long term (50-70 years) and have interest rates that are 2-10% higher than current central government rates.

They are also risky, as they contain embedded derivatives in the form of options as indicated by the name LOBO which stands for lender option borrower option.

Due to the embedded derivatives, LOBO loans have been described by financial experts as ‘lose-lose bets’ with the banks: whether market rates go up or down, the loans will be good deals for the banks, while councils always lose out.

Search for your council to view its LOBO loan details, understand how big the problem is, and learn what you can do about it.

Consult the knowledge base for more information about why the loans are bad, how councils got into them in the first place, and what has been done up to now.

In 2015, 210 local authorities across the UK had LOBO loans totalling more than £14 bn.

Since then, councils have successfully exited at least £1.6 bn and £3.9 bn have been transformed into fixed-rate loans.