The Public Works Loans Board (PWLB) could cut charges for councils seeking to restructure their debt, officials have said.
The PWLB is in talks with the Treasury and said that, while it was unlikely charges would be abolished, a decrease that could save local government millions of pounds is on the cards.
Councils are typically charged an interest rate 0.4% above that at which they borrowed if they seek to repay loans early, officials said.
The communities and local government select committee has called for this policy to be reviewed and PWLB secretary Mark Frankel said the board was taking the call “very seriously”.
“We won’t go back to one interest rate again, what we might do is reduce the gap between the two rates,” he said.
The latest PWLB accounts showed customers paid £376m in premiums for the early redemption of loans.
The Local Government Association said it knew of authorities that had lost out to the tune of “high single-figure millions of pounds” on debt re-scheduling.