Green mortgages are now top of the agenda in buy-to-let


Buy-to-let landlords and property investors wanting to up their environmental credentials will find more choice than ever in the green mortgages market.

Green mortgages are products that offer property owners incentives to take out borrowing on eco-friendly homes. The benefits could range from a more favourable interest rate than a standard loan, to cashback.

The products are not just the reserve of homeowner mortgages, with growing numbers of lenders now offering green mortgages in the buy-to-let space, too.

According to new research from Mortgages for Business, the number of such products available for rental properties is now at its highest ever level, with 353 now on the market. It means landlord borrowers have more options than ever if they want to make their properties greener.

New priorities in the rental market

The figures have been on the rise for seven months now, says Mortgages for Business, climbing from 118 green buy-to-let products available in August 2021. They now make up 15% of all buy-to-let mortgage products across the market, showing a drastic shift in priorities.

For those landlords running rental properties through a limited company, the change was even more marked. This space saw a total of 244 green mortgages available this month, accounting for 19% of the total limited company lending market.

Gavin Richardson, managing director of buy-to-let broker Mortgages for Business, said: “There are now 353 green BTL products – a level not reached since our records began. 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. While there are more green products for individual owner, the most marked increase was in limited company lending, where the number of products has risen by more than fivefold since August last year.”

Reaching carbon targets with green mortgages

Housing is a major factor in the government’s target for Britain to become carbon-neutral by 2050. Lowering carbon emissions through more efficient housing is going to be a priority, and lenders offering incentives could certainly go some way towards helping.

Richardson said: “Given much of the UK’s ageing housing stock is very energy inefficient, making our homes a major source of greenhouse gas emissions. At 14% of the UK’s total emissions, housing has a greater carbon footprint than the farming industry.

“On the other hand, this criticality of meeting the climate change challenge doesn’t make it any easier for landlords. The average bill for landlords looking to improve their property is between £6,000 and £15,000.

“Only 38% of landlords told us that they could afford to invest in making their BTLs more energy efficient. So mortgage lenders have a huge part to play in helping landlords to fund their efforts – they have a responsibility to provide the facilities to allow landlords to fund this.”

Updating the private rented sector

In the private rented sector, homes must have energy performance certificates (EPCs) with ratings of E or higher. This could change from 2025, when minimum EPC ratings might be lifted to C or higher.

The latest figures show that almost a quarter of landlords own properties with EPCs rated D or below. A big part of the reason behind this is that a lot of the sector is made up of older housing stock, which tends to be much less energy efficient than new-builds.

Therefore, a lot of buy-to-let landlords will need to start planning for how to update their rental properties. This could range from selling older stock and investing in newly built properties, to updating existing ones at a cost.

Green mortgages are certainly a good incentive to rent out more eco-friendly homes. Added to this the fact that tenants are prioritising environmental issues more than ever, energy-efficient properties are likely to become more sought-after by tenants as time goes on.

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Green mortgages are now top of the agenda in buy-to-let


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