"A short-term refurbishment loan offers them the freedom and ability to not only improve their properties but to enhance their value. Our interest rate discount is of course also a huge draw in the current climate"
- Suparn Sapatnekar - Octopus Real Estate
Earlier this year, Octopus launched its new refurbishment loan product - available via brokers - to improve the quality of the UK’s housing stock, with a focus on energy efficiency.
Octopus offers an interest rate discount to incentivise borrowers to make such improvements; schemes that achieve an EPC of C or higher and improve the Energy Performance Certificate score by a minimum of 20 EPC points receive a discount on the interest rate on redemption of the loan.
The loan – on a property in popular holiday spot Cromer, Norfolk – was redeemed earlier this month, and the borrower benefited from an interest rate discount of 1.8% on a pro-rata basis.
The mid-terrace Victorian property near the coast had an EPC rating of D (58 points). The Octopus refurbishment loan enabled the borrower to convert the property into four flats, three with EPC ratings of B (81 points each), and one with a high C rating (78 points).
The energy efficiency was improved via thermal insulation, new boilers, upgrading single-glazed windows to high-performance glazing, and the addition of energy-efficient lighting. The flats were all completed to a very high standard throughout, with the energy improvement upgrades costing c.£18,000.
As the borrower was an experienced developer, the scheme was completed in only five months. Not only did the borrower meet the required EPC improvements - therefore qualifying for the discount, which resulted in a saving of £3,300 - the first flat sold to a cash buyer significantly over the GDV.
The broker who handled the case was David Hue from Embassy Finance.
Suparn Sapatnekar, Head of Residential Bridging Credit, Octopus Real Estate, commented: “Our refurbishment loan product is proving popular with borrowers keen to retrofit older homes with newer, greener technologies.
"Recent research revealed that 19% of landlords use credit cards or other short-term financing options to pay for renovations, and a further 60% are using their personal funds or investments. Both options have their benefits, but can also limit a borrower’s ability to scale by draining cash reserves, or can leave a borrower constrained by credit limits.
"A short-term refurbishment loan offers them the freedom and ability to not only improve their properties but to enhance the value. Our interest rate discount is of course also a huge draw in the current climate.”
Steve Matthews, Head of Residential Lending, Octopus Real Estate, concluded: “There is increasing evidence of a green premium in both the sales and rental markets.
"More people are becoming concerned about climate change and how it’s affecting the planet. It’s now becoming a reality that we all need to play our part in keeping our planet green, clean, and healthy if we want to have a positive future. Home occupants across the UK are now willing to pay more for energy-efficient, smart buildings that take advantage of technology such as smart meters that help to reduce their carbon footprint and impact.
“A refurbishment loan can help landlords carry out energy-enhancing improvements, and attract more potential buyers and tenants. After all, wouldn’t you rather rent a warm, energy-efficient property with low energy bills over the house next door that hasn’t been refurbished in decades?”