How mortgages can help the Green agenda

Jeni Browne, Business Development Director, Mortgages for Business, has contributed the following to the debate:-

Every year, energy-inefficient housing emits 64 million tonnes of CO2, accounting for almost 14% of the UK’s carbon emissions. Besides Government legislation, I believe that the responsibility for trying to rectify this is the responsibility of us all: developers, lenders, mortgage brokers and property owners alike. While that’s easy to say, I’m very aware that retro-fitting environmentally-friendly improvements to properties isn’t cheap for property owners. Ultimately, we should expect all new builds to have an EPC rating of A-C as standard, but it’s the older housing stock, of which there is a lot, that requires costly improvements if we want to make a dent in those CO2 emissions.

How can mortgage lenders help?

There are currently two lenders offering further advances that either help or reward landlords making energy-efficient improvements to rental properties.

Incentives! In the buy to let market, we’ve recently seen a few buy to let mortgage lenders take the plunge and launch ‘green’ initiatives. It’s definitely early days, but here’s a brief run-down of the options on offer:

There are currently two lenders offering further advances that either help or reward landlords making energy-efficient improvements to rental properties. One requires you to spend 100% of the funds on improvements included in the lender’s criteria, with rates starting from 1.49%. The other offers a discounted rate for buy to let properties with an EPC rating of A-C with rates starting from 3.35% and no additional product, valuation or application fees. I know further advances aren’t necessarily everyone’s first choice, and depending on your circumstances, you may find bridging finance and a remortgage a more cost-efficient route here.

Three buy to let lenders now have discounted fixed-term mortgages for properties with EPC ratings of C or above. Starting from 2.99%, two and five-year terms are available from 65% – 80% loan to value with borrowing from £30,000 to £2 million. These tend to be restricted to properties that are at least two or five years old, and therefore unlikely to have started life with a high EPC rating. As well as single-unit properties, some products are available for HMOs and Multi-Units, so there is something for everyone!

Are these offerings perfect? No, but it’s a start. Furthermore, the more lenders that enter this market, the more competitive pricing will get, thus increasing the incentives for landlords. According to our research, 62% of landlords are interested in ‘green’ mortgages, and 86% of landlords believe that green mortgages should be focussed on rewarding landlords who improve energy efficiency, so we’re certainly on the right track. I only hope that these products stick around longer than many of the Government financial incentives that have come before. I’m optimistic, but only time will tell.

While there are many reasons to put energy-efficient improvements off; cost, disruption to tenants and knowing what is worth doing being some of them, the requirement for all private rental properties to have a minimum EPC rating of ‘C’ in 2025/28 isn’t really that far off. As a landlord and someone who likes to plan, I honestly think it’ll be better to get ahead of yourself here.

How can mortgage brokers help? By getting up to speed on these products and making sure to talk to clients about them! As I said, it’s early days, and not necessarily everyone will know it’s an option. So, it’s up to people in my line to work to continue educating landlords about their options.

Leading the charge on cleaning up old housing stock is not only an opportunity to improve our environment (and reduce bills!), but it’s a chance for the private rental sector to shine and show that we do care.