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Green Mortgage Products Surge on the UK’s Buy-to-Let Market

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New data from Mortgages for Business suggests that buy-to-let landlords in the UK now have access to greener mortgage products than at any time since their introduction.

For seven months in a row, the number of green BTL mortgages available in the UK has increased, coming out at a new record-high of 353 in April 2022. In August last year, by contrast, just 118 green mortgages for buy-to-let investors were available.

“Choice totally eclipsed what was on offer this time last spring; it demonstrates not only the recovery in the BTL sector, but also the willingness of lenders to innovate,” commented Gavin Richardson, Mortgages for Business managing director.

“The government has committed to making Britain carbon-neutral by 2050 — upgrading existing housing stock with energy-efficient improvements and making new-builds even more green can lower the sector’s carbon emissions,”

“Given much of the UK’s ageing housing stock is very energy inefficient, making our homes a major source of greenhouse gas emissions, . . . there’s no question that improving energy efficiency is a critical part of tackling climate change,”

“On the other hand, this criticality of meeting the climate change challenge doesn’t make it any easier for landlords — when we asked them, only 38% of landlords told us that they could afford to invest in making their BTLs more energy efficient.”

In total, green mortgages for buy-to-let investors now account for around 15 per cent of all available BTL products from UK lenders.

A Transition Driven by Legislation

Speaking on behalf of Cherry Mortgage and Finance Ltd, Matthew Fleming-Duffy suggested that green mortgages are still low on the priority list for most borrowers.

“It seems to be legislation that’s driven the market to create green mortgage products, as most people don’t ask for a green mortgage when enquiring about their borrowing options,” he said.

“Britain has a long way to go before these products really gain traction, but further legislation may be necessary to ensure homeowners are encouraged to transition away from fossil fuels,”

“It’s great to see lenders picking up on it though. Saffron Building Society, for example, is offering a two-year fixed rate at 2.07 per cent up to 80 per cent loan to value (LTV). The Green Mortgage Hub – launched by the Green Finance Institute at the end of 2021 – currently lists 36 products which offer financial incentives to owners or purchasers of energy efficient properties.”

He also highlighted the potential difficulties some landlords may face going forwards in order to meet the government’s new energy efficiency requirements for buy-to-let homes.

“Landlords may feel particularly under the cosh, but they are particularly well-served in the market now with better pricing being offered by several lenders for properties that are energy efficient,” he added.

“They are facing fines for non-compliance with the Minimum Energy Efficiency Standards legislation, and generally being unable to remortgage if their properties have an EPC rating below E. However, replacing halogen lightbulbs with LED bulbs and insulating the walls and roof are simple, low-cost ways to improve a property’s EPC rating. More expensive solutions like double-glazing and installing a new boiler may become essential as the government drives its legislative plan, which may mean some landlords decide to sell rather than consider such a cash outlay.”

A Gimmick With No Practical Value?

Elsewhere, there are those who question the practical value of the green mortgage concept outright. Lewis Shaw, founder at Shaw Financial Services, lashed out at the scheme in its entirety, suggesting it is nothing but a ‘gimmick’ of questionable merit.

“Green mortgages are a gimmick, a way for lenders to jump on the green bandwagon to get some of the kudos that goes with being a responsible and caring business pretending to care about climate breakdown and ecological collapse,” he said.

“They’re trying to prove they’re doing something positive about climate change, yet, at the same time, the big six and others are still bankrolling and investing in fossil fuel extraction and the fossil fuel industry – the same industry that has caused, and is continuing to cause, environmental destruction. Talk about bait and switch.”

“The majority of green loans are for category A or B properties, which is fine on paper, but it’s a load of rubbish in practice because the new properties are actually built to poor standards. Most of the time the properties are still under construction when the EPC surveyors are looking at them and therefore make much of the rating upon assumptions based on current construction methods and principles, not through a proper post-build check.”

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UK Property Finance