Green mortgages

On the Buy to let side we are seeing lower mortgage rates offered to properties with a C or above EPC rating. This is obviously attractive to investors and encourages them to hit that as a minimum when buying or renovating. Plus it makes sense for landlords to get ahead of the curve with greener properties because from 2025, all newly rented properties will be required to have an EPC rating of C or above. This could be a really big ask on some properties, like older properties and ones that have a LPG gas supply. I would like to see more help given to all property owners to install solar with batteries.

I can honestly say I have never had a client request a mortgage deal based on its green credentials alone. Which is hardly surprising as the green mortgage market is fragmented in terms of what the "green" label means on a mortgage and it is very rare that people had historically considered the running costs of their dream home - something that could well be changing if energy costs continue to rise. For the mortgage market to truly have an impact on peoples' choices to go green then the mortgage deals need to reward green improvements; benefits like cash back vouchers that can only be spent on green products, or interest rate reductions for each EPC band you move to and the like are what is needed. Currently we have a few deals that give a marginally better interest rate for houses that are already energy efficient, or a small cash back element for spending on green home improvements (but often not checked). This is hardly a surprise as the margins in mortgages are very small and so there is not much reward that a lender can give away, it would require a more significant reward for the lender (in terms of the capital rules, for example) to allow them the extra margin to then pass on to actually change customer behavior.

The appetite for green is growing but frankly customers don't really care about buzz words and intangible jargon like EPC ratings. The main driver for people is as simple as more money in their back pocket. Will the mortgage rate be cheaper and are their energy bills likely to be less? If the mortgage industry can really get its head round incentivising customers to make their properties greener and thus cheaper to run the eco revolution that we need will be driven by homeowners not big business or government. A game changer in my opinion would be if a lender had say a £10K drawdown facility on all their mortgages that could only be used for eco measures and once done the mortgage switched over to a green deal with minimal fuss.

I am seeing an increase in Landlords utilising green products for their mortgages, as they will soon be required to have C rating on rental properties anyway. This has led to an awareness of their energy rating, and in turn the ways they can offset the cost of making their properties C rating of better going forward.

Hi, For question #1: To be honest there hasn’t been much if any appetite from clients to go on the green mortgages, its more of a bonus to those who’s properties are already at an EPC of A-C, but I have not had any clients actively change their EPC (which could cost thousands) to achieve slightly lower rates. For question #2: I do think an incentive would be lower rates, lower arrangement fees but the cost of making a property more energy efficient just far outweighs the benefits of a lower rate and lower fees. I think a serious change needs to take place in order for more people to make their properties greener. I think a grant needs to be put in place for these types of works especially for lower income families or an interest free loan. This way clients actually have an option available, the money is there If you want to improve the EPC and if you do put the time and effort into this you will be rewarded with lower rates. At the moment lower rates have no effect on whether the clients improve the EPC as although they may desperately want to they don’t have the money in this economic crisis. For question #3: Yes I do have borrowers actively aware of the properties EPC ratings since the new regulations were brought in and this will definitely increase as the 2025 deadline approaches. It can be difficult as a broker to advise clients on what to do to change the EPC but we can advise them of who to speak to about this concern, advise them of the deadline and if needed provide short term funding in the form of bridging loans or longer term funding from remortgaging their existing properties to pay for work to be done to the property to raise the EPC.