Green mortgages can help landlords prepare for an eco-friendly future

In 2019, the Government committed to making Britain carbon neutral by 2050 and according to the government’s national statistics, residential properties account for 15% of the UK’s total climate emissions. 

In 2020, before the pandemic hit, an IMLA (Intermediary Mortgage Lenders Association) survey showed that 43% of consumers had not heard of green mortgages and at the time 43% of lenders said they had no plans to launch them. Fast forward eighteen months and through the pandemic, the momentum is beginning to grow.

Green issues are dominating the news agenda as COVID begins to fade and interest among consumers is growing and lenders are responding to the growing interest.

The FCA is also aligning its policy with the government’s commitment to a greener future. We are going to see the FCA increase its emphasis on greening the industry, by coaxing lenders to ‘do their bit’ in marketing green mortgages. Meanwhile, the building sector is going to have to commit not only to building more energy-efficient homes, without which the long term effectiveness of an eco-led future is damaged before it starts.

EPC certificates with their current qualification criteria and the value placed upon them will, for the time being, represent a standard that all parties can understand and work with. For lenders offering green mortgages, the EPC qualification will continue to be the gold standard.  

At Landbay, we have just launched our first green portfolio for both purchase and remortgage. Like others, we have spent time considering the issues and concluded that the time is right to give introducers access to a range of products that will be of benefit landlord clients whether they are buying or refinancing.

Currently, rental properties are obliged to have at least an E rated EPC. However, the government wants as many as possible to be upgraded by 2030 and our new green mortgage range will go some way to help achieve that goal and incentivise more landlords to consider adding energy-efficient properties to their portfolios.

Unfortunately, the £2bn Green Homes Grants package of investment for homeowners to implement energy-efficient upgrades is only being made available to owners of main residences. Whilst landlords are not obliged to improve the energy efficiency of their properties, pressure will be brought to bear as 2030 gets closer.

According to a survey by Mortgages for Business in March, out of 300 landlords, three in five said they were interested in products that offer a lower rate for making their properties more energy efficient. Twenty years before that figure was only 10%.

Apart from the incentive of lower rates of interest on green mortgages, landlords are recognising the growing value of owning property that not only meets today’s energy standards but also anticipates future requirements. Last year, the government’s consultation document outlined the case for requiring new rented property to have an energy efficiency rating of band C from 2025 and 2028 for existing privately tenanted buildings.

Green mortgages provide landlords with the means to meet tomorrow’s challenges by helping to improve existing property portfolios and being more selective when investing in energy-efficient housing for new purchases. Advisers have a major role to play in educating landlords that green mortgages will not only help to improve the quality of tomorrow’s rental housing stock but will also make a positive impact on their future profitability.

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