Back in November I wrote a piece on Property Reporter which centred around the environment and how the pandemic has made us review the way we live our lives and the world in which we live. And this is a sentiment which has certainly been reflected in the residential and BTL mortgage markets in Q1 2021.
We have seen a raft of activity from a variety of lenders across an area which has been somewhat underserved for far too long – Green Mortgages. So let’s take a brief look at this activity and look ahead at what to expect in Q2 and beyond.
One of the most noteworthy examples was Paragon Banking Group successfully issuing £150m in Tier 2 Green Bonds to become the first UK bank to issue a subordinated instrument in the sustainable finance space with the proceeds of the bond being allocated to green loans. Paragon believes this move will incentivise landlords to mitigate the impact of climate change, specifically green residential real estate loans in England and Wales with an EPC rating of “A” or “B”.
Back in February, the lender also launched four green further advance products to support landlords in improving the energy performance of their properties. In the same month, Foundation Home Loans introduced a ‘Green Reward’ remortgage for landlords. This is a product designed to reward landlords who have paid out to make improvements and Foundation do not stipulate which energy-efficient requirements within each home must be implemented in order for them to secure a ‘C’ rating.
Within the residential market, Ecology Building Society added to its green mortgage range by launching a variable rate renovation mortgage. According to the lender, the new offering is designed to encourage borrowers to upgrade their homes to a better energy efficiency rating. In addition, Newbury Building Society has introduced a ‘GoGreen Reward’ incentive on its self-build mortgage products and Nationwide Building Society has recently cut the rate on its Green Additional Borrowing by up to 1.80%.
With housing estimated to be responsible for around 22% of the UK’s greenhouse gas emission and under recent government proposals, all property let to new tenancies must have an Energy Performance Certificate (EPC) rating of at least “C” by 1 April 2025, then it’s clear that action is required. Indeed, it’s been reported that just under three million rental homes will need to improve their energy performance to meet this deadline.
This will require a concerted and coordinated effort from the government, lenders and landlords. It’s great to see such positive forward strides being made and I fully expect lenders who are already active in this space to intensify their green focus in the coming months. In addition, many lenders who have been carefully assessing this product arena will emerge and help generate some much-needed competition over the course of 2021. So, watch this green space. Exciting times lie ahead for landlords and homeowners.