Green mortgages set to play vital role in the future of property

As we see many world leaders, delegates and famous faces jet in and jet out, stay awake and fall asleep at the COP26 summit in Glasgow, this continues to generate a huge amount of column inches and debate.

The question of whether any real solutions will emerge is anyone’s guess but, if nothing else, it’s encouraging to see such widespread coverage of this event and the awareness being raised around the huge climate-related challenges which impact us all.

The environmental fallout is certainly not lost on the buy-to-let sector as a raft of lenders have entered the green space in recent times and/or reshaped their product ranges accordingly. In recent weeks, we’ve seen Paragon Bank reintroduce its green buy-to-let product range. The lender has also extended its green offering to all property types, including single self-contained properties (SSC), houses in multiple occupation (HMO) and multi-unit blocks (MUBs), having previously been restricted to SSCs.

Foundation Home Loans also launched ‘Green ABC+’ fixed-rate products for both buy-to-let and owner-occupied mortgages, with rates and cashback based on the property’s energy performance rating. In addition, LendInvest has released a green mortgage range that is designed to incentivise landlords to bring up their properties to an energy performance rating of C and above.

The aim of such mortgages is to reward landlords and investors who have made a conscious choice to buy energy-efficient properties or improve those which they currently own. As outlined many times by various lenders operating across the mortgage market, whilst energy efficiency levels for a variety of properties have improved in recent times, there is still a huge amount of progress to be made before the UK can get anywhere near its carbon zero target.

The push for greater energy efficiency in the UK’s housing stock is only likely to continue and whilst it’s great to see so many lenders providing a green offering, greater education is required amongst consumers around this product type. This was evident in a new poll conducted by Countrywide Surveying Services, which suggested that an overwhelming 94% of brokers are yet to ‘sell’ a green mortgage product. In addition, 92% of surveyors reported that they are still yet to value a property with an EPC rating of A.

With mortgage brokers heavily involved in the vast majority of property purchases, this is a statistic that really hits home just how far we still have to go for the green mortgage revolution to have any major influence. That’s not to say that demand and appetite for increased energy efficiency are not out there, it is.

However, for any real impact to be made, we need volumes of green mortgages to dramatically improve from a residential and BTL perspective and for real competition to emerge within this product type. I am optimistic that green mortgages will play a vital role in our property-related future but, as with the general combatting of carbon emissions and greenhouses gases, change needs to come sooner rather than later.

Source: Property Reporter, 9^th November 2021