The Audit Commission, Housing Corporation and Office of the Deputy Prime Minister are to launch a "charm offensive" to convince lenders the single inspector will work.
The funders and their representative the Council of Mortgage Lenders will meet with civil servants to discuss how the commission will take over the corporation's inspection work in April 2003 (HT 3 October, page 7).

Lenders are understood to be largely happy with the prospect of the Audit Commission as single inspector, but warn against any further erosion of the corporation's role.

This is because lenders see the corporation's continuing role as housing associations' regulator as vital to their continued confidence in the sector.

Royal Bank of Scotland finance director Richard Hughes said: "We are overjoyed that the inspections have been separated out, but we are reassured that financial regulation will stay with the Housing Corporation."

Council of Mortgage Lenders deputy director-general Peter Williams said: "The corporation is essential to the partnership of lenders in the housing market and if anybody thought otherwise they would be mistaken.

"Lending on social housing at the moment stands at £27bn, which is substantially more than that raised for private finance initiative schemes in the UK at £22bn – it's worth bearing in mind how significant private finance is for social housing."

Speculation over how the commission's housing inspectorate will review registered social landlords continued this week.

It is understood that the corporation and commission have not had any formal negotiations since last week's announcement, but both organisations want to move slowly towards the handover to avoid duplication of bureaucracy.

This week, best-value specialist the Housing Quality Network suggested the commission would use the controversial star ratings for RSLs as that would allow tenants to choose between landlords where there was competition. It would also act as incentive for associations to improve services. The group said: "The sharpness of the Audit Commission's Housing Inspectorate's grading scheme was undoubtedly a plus point in the contest. And we expect that much the same regime will be applied to associations."

But it is believed that any change will not be immediate, with the inspector putting transitional measures in place. "Housing associations will not be seeing stars straight away next April," said one well-placed source.