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Virgin launches Retrofit Boost Mortgages with up to £15k cashback: "But it does come with a sting in its tail"

ended 09. July 2024

Virgin Money have this morning announced the launch of a new range of Retrofit Boost mortgages, offering up to £15,000 cashback to homeowners making energy-efficient improvements to their properties (see screengrab attached). Newspage asked brokers for their views, below.

6 responses from the Newspage community

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Tracey Dixon
Owner/Broker at Pure Mortgage and Protection
Green mortgages with cashback can be tempting headlines, but they might not be the most wallet-friendly way to make your home greener. Remember, lenders aren't handing out free money. Those cashback incentives often come with higher interest rates, which could erase any long-term savings you might see on your energy bills. It's crucial to compare these green mortgages with traditional options to make sure it's the most cost-effective solution for your specific situation.

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Simon Bridgland
Director at Charwin Private Clients
Cracking headline. Who wouldn't want £15,000? But it does come with a sting in its tail. Achieving the top rate of green label cashback means tying in for a whopping 10 years at some eye-watering rates, 5.84% on residential and 6.19% on buy-to-let. Given that leading rates currently available for both borrower types are much lower, why would you choose to shoot yourself in the foot like this? Borrowing £15,000 via an unsecured loan for 5 years would cost a little over £18,600 at 9%. The increased rate with Virgin when compared with a market leading rate would be roughly £80 per month more if you were to borrow say £120,000 over 20 years, tied in for 10 years this is roughly £9,600 more just over the 10 years, so not as good a cashback as it first seems.
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Justin Moy
Managing Director at EHF Mortgages
As always there is no such thing as a free lunch, as cashbacks are typically funded by increased morgage rates. However, for those who may have considered borrowing extra on their mortgage to pay for upgrades to their property, this is an indirect way of achieving that same outcome. Green mortgage product innovation is definitely needed within the industry and Virgin should be appluaded for this move. It's a positive option but with many borrowers more worried about mortgage payments rather than the green improvements, this may be better positioned when rates have started to fall.
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Ben Perks
Managing Director at Orchard Financial Advisers
Is this the most cost-effective way of making your home energy efficient? No. But these products will grab the headlines and it will encourage many to make the improvements that could benefit them financially in the years to come. So it isn’t all bad. Mortgage lenders aren’t charities, so the rates will be higher to price in the cash incentive. It is important for borrowers to explore all avenues before committing to a product offering substantial cashback. Cheaper alternatives may be available elsewhere via normal capital raising.
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Bob Singh
Founder at Chess Mortgages
It’s good to see lenders putting the green into mortgages but borrowers are less concerned about the EPC ratings research has shown. Raising the interest rate to give a cashback isn’t a cashback but a loan albeit at preferential rates. Whilst it’s unclear how the lender will ensure the funds are put to a green use, it could help borrowers with additional funds on completion. The differential between green rates and normal rates isn’t enticing enough and is only set to diminish as rates edge lower.
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Hannah Bashford
Director at Model Financial Solutions
Innovation in this space is very welcome but when the cashback is factored into the deal by way of increased interest rates, it feels like a token gesture as opposed to a real development and truly innovative product.