They involve periodic interest re-fixings, which incorporates two linked options:[1] They are provided by banks and the loan contract runs for between 40 and 70 years.
LOBOs existed at this time too, and (as would be expected) offered the borrower a chance to repay at no penalty if the lender's choice of new terms was unacceptable; rarer were rather more flexible sequences like BOLOs or BOLOBOs.
Modern, more complicated LOBOs (that is, those from c. 2000) were made available with low teaser rates, cheaper than PWLB loans so they appeared to be an attractive alternative.
Clive Betts, MP and chairman of the Communities and Local Government Committee, has called for an inquiry into ‘outrageous’ LOBO loans.
[1][2] It has been calculated that if councils were free to relinquish their LOBO contracts at no penalty and instead borrow at a more typical market rate it would save them about £145 million for 2015 alone.
Newham resident and Green Party spokesperson Rachel Collinson was the first to do so, asking then auditor of Newham Council, PwC, to declare the spending on LOBO loans to be ultra vires, or technically illegal, being beyond the council's authorised powers.