Newham LBC is expected to save £143m after successfully terminating its Lender Option Borrower Option (LOBO) loans with NatWest bank.
The agreement will allow the council, which took out six LOBO loans with the bank in 2009, to pay off the loans at a considerably lower rate of interest.
Mayor of Newham, Rokhsana Fiaz, said: 'Over the past 10 years that the loans have been in place, it’s cost us an extra £31m in interest payments compared to borrowing from the PWLB [Public Works Loan Board].
'That’s money that should have been spent on Newham residents.
'Earlier this year, I made a promise to Newham residents that I’d make every penny count and that’s why this council filed a claim against the bank in the High Court in February.
'The deal that we’ve successfully nailed down means that we’ll be saving up to £143m for Newham residents, which is a successful resolution of this litigation.'
In 2015, the Channel 4 Dispatches programme found that around 240 local authorities took up to £15bn in LOBO loans from private banks, which charge interest rates of more than 7% in some cases.
Research published last year showed councils could save £16bn by refinancing LOBO loans.
