Bridging the green agenda – Pritchard

To date, brokers have largely prioritised price, speed and service in response to immediate client needs. Which means lenders looking to incorporate more green lending will need to ensure that any solution also addresses these ongoing needs. And that can be a challenge.

However, if the industry can come together to define what green products look like, what best practice looks like and ensure borrowers, brokers and lenders are looking to achieve the same goals, then that could be a game changer.

A shift in mentality

I expect 2023 to be a watershed year.

The focus on energy efficiency and how it impacts on real estate has never been greater. It is also where the most difference can be made, and where those accessing bridging finance – homeowners and professional investors – are most impacted. From carbon regulation to customer demand, all signs are pointing in the same low-carbon direction.

More green lenders will enter the market next year, which will act as a wake-up call for many existing lenders. It is similar to when Glenhawk launched back in 2018 – there were very few lenders focused on reducing borrower costs.

As more institutional capital enters the sector, which itself is now scrutinised thoroughly by limited partners, so there is pressure on lenders to demonstrate their green credentials.

By this time next year, we will see a lot more green products in the market and the bridging industry is uniquely well positioned to assist with improving energy efficiency through refurbishment lending – areas from which traditional term lenders can shy away. The seeds are there to support borrowers in taking an EPC E or D-rated property and improving it to a C or B, for example.

The type of incentivisation that would work best with borrowers needs to be fully understood and as short-term product providers, we may need to get creative.

A clearer picture

Clarity is also required in 2023.

It feels like landlords have had the green agenda forced upon them in recent years. From 2025, all rental properties, we are told, might need an EPC rating of C or above. But nothing has been signed off by the government yet. There is a clear gap in landlord understanding of how the changes will impact them and their current yields – incredibly, a recent lender survey revealed a quarter of landlords surveyed said they had little to no knowledge of the forthcoming changes.

The real estate sector has a responsibility to play a leading part in mitigating climate change. And lenders can drive evolution in the bridging space, with sustainable products as a foundation of their offering. We also need to take a lead in educating brokers and borrowers as to the benefits.

If a landlord can say ‘rent my property rather than another property because I know your energy bill is going to be less’, that’s a no-brainer.

Lenders leading by example

Lenders can also set an example by reducing their own Scope 1 and 2 emissions – in 2021, Glenhawk became the first UK bridging lender to achieve a carbon neutral certification from the Carbon Trust. It has also implemented a carbon management plan to ensure all employees are aligned with the objective across the business.

Rising energy prices, the cost of living crisis, a more conscientious consumer, and government policy are all factors that point towards delivering greener homes and bridging finance is key to this.

There is much to do, but we should embrace the challenge of driving forward a sector that has already come a long way in a short period.