Speaking on a Mortgage Solutions video debate in association with Halifax Intermediaries, Mason said that additions to homes, like solar panels, have “tended to create problems from a valuation perspective”.
Not all lenders will currently lend on a property with leased or rented solar panels. Those who do consider it require further detail around financial responsibilities, such as whether the panels will be considered part of the property within the sale, or seen as the previous owners’ property in a similar vein to furniture.
Mason believes attitudes toward greener renovations need to be changed. He added: “They’re viewed quite negatively, and I think if we are genuinely to drive a sustainable agenda, we need to think carefully about our lending criteria on things especially like solar panels. They need to be viewed more positively.
“We want more people to do this, so they are energy self-sufficient. If our lending doesn’t catch up with sustainable activities and sustainable improvements, that’s going to be a problem.”
The advice process
Kevin Roberts, director of Legal and General Mortgage Club, said conversations around a property’s energy efficiency tend to occur later on in the advice process.
However, he said that was shifting, saying: “What we’re seeing is the property risk coming much more to the fore of the research journey.”
Roberts believes that working towards energy efficiency presents a “real opportunity” for brokers, especially those with landlord clients who are up against the EPC deadline to improve the sustainability of rental homes.
He added: “I’ve seen real innovation with some of our firms around using these kinds of messages to keep abreast [of energy efficiency] while a customer is in a five-year fixed, and to keep those marketing messages coming.”
Watch the video embedded [8:10] hosted by Shekina Tuahene, commercial editor at Mortgage Solutions, featuring Andy Mason, head of strategic partnerships and housing at Lloyds Banking Group, Bukky Bird, group sustainability director at Barratt Developments and Kevin Roberts, director of Legal and General Mortgage Club.
Sponsored content in association with Halifax and Lloyds Banking Group. For Intermediary Use Only
Speaking on a Mortgage Solutions video debate in association with Halifax Intermediaries, Roberts said: “I think lenders have made a really good start in terms of innovation, but there’s a really long way to go.
“We now need to start demanding from lenders that we get much more focus on that. It’s not just a discount for A to C, whilst that’s nice, it’s not necessarily helping the issue.”
He suggested that there needed to be help available so people could improve their home’s EPC rating and get the finance for it.
He added: “Maybe we can be more creative around affordability measures if it’s for green [mortgages].
“Maybe we can have much more cashback, maybe we can have more marketing. Some consistency, maybe, from the lenders would be really helpful. Education is always good – if lenders could collaborate a little bit more.”
Bukky Bird, group sustainability director at Barratt Developments, said “the dream” was for every conversation a homeowner had about financing their home to consider the benefits of being energy efficient.
She also proposed the idea of “genuinely impactful financial products” which factor in the savings that can be made when making a home more efficient.
Andy Mason, head of strategic partnerships and housing at Lloyds Banking Group, said he wished to continue having “great” and “practical” conversations around green mortgages.
He said Halifax was working on improving the quality of its backbook from an average EPC rating of D to C.
He also said the bank was looking at piloting products to encourage people to retrofit their homes and improve energy efficiency.
Watch the video embedded [7:01] hosted by Shekina Tuahene, commercial editor at Mortgage Solutions, featuring Andy Mason, head of strategic partnerships and housing at Lloyds Banking Group, Bukky Bird, group sustainability director at Barratt Developments and Kevin Roberts, director of Legal and General Mortgage Club.
Sponsored content in association with Halifax and Lloyds Banking Group. For Intermediary Use Only
Speaking on a Mortgage Solutions video debate in association with Halifax Intermediaries, Mason said: “We need to encourage broader participation of things like sourcing systems so brokers can easily source products that are helpful for sustainable lending.”
Overall, he praised the housing sector for being innovative with respect to meeting its green targets.
Mason added: “There’s so much activity to try and understand what the house of the future needs to look like. It’ll be fascinating to see how it evolves – for example, what kind of heating systems do future homes need?
“Modern method of construction (MMC) homes are rapidly evolving. The big benefits there are the energy bills in these MMCs can be much smaller because they’re engineered in the factories to be highly efficient.”
Mason said more could be done however, and although lenders have created products to offer cashback or lower rates to borrowers retrofitting their homes, other means to encourage and promote energy efficiency could be utilised.
“For example, capturing EPC in the mortgage journey is going to be essential for the future, and then you can start to think about reflecting genuine affordability,” he added.
Kevin Roberts, director of Legal and General Mortgage Club, said the industry was doing well to think about its impact on the climate and environment on a broader scale.
He added: “Even if it’s having electric cars, putting things on their [company] website, offsetting [the mortgage process] by planting trees, people are starting to think about this and that’s because our consumers are.”
Bukky Bird, group sustainability director at Barratt Developments, said not enough steps have been taken to encourage borrowers to reach a level which was needed, but suggested financial products which factor in a customer’s monthly savings could help.
She added: “I think we probably need bolder partner engagement; I think we need to just do some things. Just trial some things, get out there, not wait for every single thing to fall into place.”
Watch the video embedded [8:51] hosted by Shekina Tuahene, commercial editor at Mortgage Solutions, featuring Andy Mason, head of strategic partnerships and housing at Lloyds Banking Group, Bukky Bird, group sustainability director at Barratt Developments and Kevin Roberts, director of Legal and General Mortgage Club.
Sponsored content in association with Halifax and Lloyds Banking Group. For Intermediary Use Only
When asked if all new build homes should be built to an EPC rating of A or B, Bird said yes but challenges remain.
She said the Future Homes Standard was helping housebuilders address this, but a firm roadmap with more detail was needed.
The Future Homes Standard requires all new-build homes to be developed with low carbon heating and to be energy efficient by 2025.
Andy Mason, head of strategic partnerships and housing at Lloyds Banking Group, said the new build sector was well placed to benefit from the green revolution. He also said house builders were at the forefront of driving toward more efficient goals.
However, he agreed that there were challenges with building homes to an A or B rating due to issues with the current EPC framework.
“When we’re testing out new technology like air source heat pumps, the EPC framework doesn’t work perfectly today for the technology of the future,” he added.
Air source heat pumps are not currently recommended to improve a home’s EPC rating because the methodology calculates how much the cost of fuel would be for each square metre of a home.
As electricity is more expensive than gas, air source heat pumps often lead to a home’s energy efficiency rating being downgraded, despite them being a more efficient way of providing heat.
Mason said: “There’s a potential that today the Future Home Standard on the basis of the EPC framework may actually not look like a highly-rated efficient product.”
Bird agreed and said this highlighted the scale of the challenge as there were many things which still needed to be lined up.
She added: “Whilst broadly, we’re in support of EPCs, we know that they really need to be fixed. They’re not yet future ready, they’re not yet future fit.”
Regarding existing housing stock, Kevin Roberts, director of Legal and General Mortgage Club, said advisers were at the start of the journey but the messages being delivered by policymakers were still “a little bit muddled”.
He added: “Our regulation is for mortgage advice, it’s not for green advice so we have got to understand what is our role. We’ve got to make sure we don’t venture into advice that either we’re not able to give or that might come and bite us in a few years’ time.”
Mason said it was also about convincing people in lower-rated homes that it was better to spend their money on renovating a home to make it greener rather than refurbishing a room.
Watch the video embedded [8:37] hosted by Shekina Tuahene, commercial editor at Mortgage Solutions, featuring Andy Mason, head of strategic partnerships and housing at Lloyds Banking Group Bukky Bird, group sustainability director at Barratt Developments and Kevin Roberts, director of Legal and General Mortgage Club.
Sponsored content in association with Halifax and Lloyds Banking Group. For Intermediary Use Only
Speaking on the Diversity and Inclusivity Finance Forum (DIFF) podcast, Mason said it was crucial for the financial services sector to acknowledge this in its work and actions.
He said: “Financial inclusion is massive from a Lloyds Banking Group perspective, and we’ve all got a social responsibility. We talk about privilege and if we’re not careful, privilege breeds privilege a bit like money makes money.”
“You end up in an environment where you don’t have a real view of what life’s all about, you just have your sphere of influence, and you forget that there are people in the UK who are genuinely really struggling financially.”
He added: “Home ownership is actually one of the biggest enablers of wealth, financial inclusion, and social mobility in anybody’s life.
“The fact that people genuinely struggle to get out of private rent, social rent and buy their own home is a massive disadvantage to people.”
Mason commended fellow guest Rupi Hunjan, CEO and founder of Censeo Financial for working with housing association Genesis to pioneer the shared ownership model.
He said Hunjan’s work in this area was “fantastic” because it gave people access to having property as an asset, with the ability to own some of their home and benefit from any growth in equity.
Reflecting the client base
Due to its structure of allowing people to own a share of their homes at a lower cost, host Bharat Sagar asked Hunjan if his workforce was deliberately diverse because shared ownership buyers tended to be.
Hunjan said this was not originally his intention, as he set his firm up in a “prestigious” location and wanted to proposition shared ownership as something which was not just for blue collar workers.
He said he simply judged his employees on merit and a diverse workforce was naturally created this way.
Hunjan said: “There are no politics; 50 per cent of my team comes from what we call BAME (Black, Asian and minority ethnic), 48 per cent are female, 10 per cent are disabled.
“If you work hard and have the qualifications, we’ll give you a chance. And if you perform, you stay. And if you don’t, you end up leaving.”
Hunjan said he had always been self-employed so had the belief that if you work hard, you take the credit and if you don’t you accept the blame.
He added that there “shouldn’t be any issues if a business is run that way”.
However, he noted that because of his diverse workforce, his employees were often able to empathise with the firm’s clients.
Mason agreed and said the industry needed to adopt more of Hunjan’s approach.
“We recruit a lot of people from certain universities and ex-consultants. When you talk about shared ownership and social inclusion, a lot of those people have no concept in reality of what life is like for somebody in circumstances completely different to them.
“Sharing experiences like Rupi’s firm should encourage people to think more about the makeup of their teams,” he said.
Hunjan said many people did not even get the opportunity to be interviewed and suggested the use of name-blind CVs, something brought up by Sagar, to reduce unconscious recruiter bias and make sure people from diverse backgrounds at least get that chance.
Mason added: “It seems like Rupi has been very proactive.
“I think we all need to try harder. It’s not good enough anymore to have a shortlist of people and say ‘we tried to tick the d and i (diversity and inclusion) box, but we ended up with a shortlist of four blokes because we didn’t get enough people applying’ – I think we all need to be more deliberate.”
Hunjan said this was imperative, but to also be mindful of that fact that ethnic minorities made up a small proportion of the population so to not get caught up in tokenism when recruiting.
Listen to the podcast [31 minutes] below.
The Homes for Ukraine scheme was launched earlier this week and allows individuals, charities, community groups and businesses in the UK to house Ukrainian refugees. As part of the scheme it offers a £350 month thank you payment to sponsors and the minimum period is six months.
A website to register interest in the scheme was launched by the Department of Levelling Up, Housing and Communities on Monday.
A government spokesperson from the Department of Levelling Up said that over 100,000 people had registered their interest in the scheme since it was launched. However, they said it currently did not have a breakdown of how many of those were mortgage borrowers, but that data may become available in due course. They added that the scheme was open to all applicants, which included landlords.
On its website it says that in “some cases” people will need to check with their landlords, freeholder, mortgage provider and insurance company.
“It’s important you think through any possible implications for your tenancy, mortgage, lease and insurance before your guest arrives in the UK,” it said.
It continued: “Lenders have committed to enable as many borrowers as possible to participate in the scheme. If you have a mortgage on the property you will need to contact your mortgage lender. We are working with the mortgage lender sector to standardise and simplify this process as far as possible.”
Varying views on lodger criteria
Dina Bhudia, managing director and chief executive of P2M Asset Management, said she had already received calls from customers asking about the scheme.
However, she said there were questions around how the £350 payment would be taxed and how this might impact landlords, whether it would be included in affordability calculations or not, and how the scheme would operate under tenancy law.
She said it was unclear how it would interact with the Housing and Tenancy Act, and therefore was ambiguous as to how evictions may work if necessary.
She also noted: “I think people are thinking with their heart here so they may not think to notify their mortgage lender in the first place, they may not be aware that they have to which could create problems further down the line.”
Wesley Davidson, director at Fox Davidson, said the scheme had “noble intentions” but there were “challenges that needed to be addressed”.
He explained: “Properties that are mortgaged will have restrictions on allowing additional people to live in them. Mortgage lenders have specific rules with regard to lodgers, so will they waive any restrictive conditions?
“Where a property is mortgaged as a rental property, lenders typically only allow tenants who are on an Assured Shorthold Tenancy, which would not be the case here. Clearly there needs to be more input from the government and from mortgage lenders so that the scheme doesn’t cause any legal issues for homeowners with mortgages.”
He added that he expected demand to be high, and said the issues were “rather trivial given the hardship many are facing in the Ukraine”.
“Therefore, I would hope that the points mentioned above are addressed quickly so that all those offering homes can be matched with those in need,” he said.
However, Jane King, mortgage and equity release adviser at Ashridge Finance, said it would have “no effect on mortgage lending” and that the criteria needed would be very similar to taking in a lodger, which lenders already allow in certain instances.
She said: “They [lenders] do not object to a lodgers and the families would not be renting the property on a commercial basis. Rather they are being ‘hosted’ so the income from the scheme could not be used for affordability, unless lenders decide in the future to accept this, and so this arrangement would be fine.
“I cannot think of any pitfalls apart from those that would apply regardless of who they were bringing into their home such as potential criminal behaviour, squatting and so on but those scenarios are very rare.”
However, Chris Sykes, associate director and mortgage consultant at Private Finance, said that whilst most lenders would allow you to have a lodger with an informal or lodger agreement in place, this was usually for an individual rather than a family and was often “open ended to protect both the homeowner and bank”.
He added that as the Homes for Ukraine was generally aimed at families this could raise some questions for lenders.
Lewis Shaw, founder and mortgage expert at Shaw Financial Services: “Notable challenges will be around the legality of receiving income from the state for a lodger and how this affects your home insurance. Anyone with a mortgage or buildings and contents insurance should check that all providers are happy.
“Though I’m sure things will be fine, don’t make the assumption they will be. Check it and get it in writing to cover yourself in the event anything untoward happens.”
Buy-to-let landlords using the scheme could be ‘more complicated’
Brokers expressed concerns around buy-to-let landlords using the scheme, as it could unintentionally violate mortgage terms and conditions.
Sykes said: “If letting a buy-to-let on this basis it could be more complicated for sure. Especially when needing to remortgage as lenders often go off the lower of the received rental and the market rental for their affordability calculations.”
Shaw added that he was worried about “unscrupulous landlords” taking advantage of the Homes for Ukraine scheme. Bhudia agreed and said there needed to be a safety net in place so that refugees using the scheme were not exploited.
Matthew Rowne, director of The Buy to Let Broker, said: “It is vital that the government swiftly provides details as to how landlords can easily register properties that might be suitable for those who need homes.
“Landlords who have leveraged their portfolio will also need lender guidance to ensure that they are not falling foul of individual lender terms and conditions.”
Rowne added: “It is too early to obtain all lender’s perspective on this at this stage, however lenders and our industry have pulled together in terms of crisis historically, and with such tragic events happening right before our eyes, we should all be doing everything we can do to help those in most need, both as an industry and individually.”
Trade body and lender overview
UK Finance and the Building Societies Association (BSA) are currently working with the government on finalising scheme details, with aim of it “being implemented as quickly and simply as possible, enabling homeowners to participate easily”, according to a joint statement.
It continued that mortgage lenders were “supportive” of the scheme.
It added: “The immediate guidance for homeowners and landlords with a mortgage, who already have or wish to express their interest in joining the scheme, is to look at the government website and FAQs. It will be important for borrowers, once accepted onto the scheme, to let their lender know.”
Skipton Building Society announced earlier this week that it would support borrowers who wanted to sign up for the scheme and would offer its own vacant properties to refugee families.
Stacey Stothard, head of sustainability at Skipton BS, said the position was a “starting point” and it would “make it as easy as possible” for borrowers to sign up for the scheme. She added that it had not had any cases yet for new borrowers, but it had a lot of interest from existing borrowers.
She said for new customers interested in the scheme, they would assess how many adults would be in the property. She said more guidance was needed from the government on how the grant may or may not impact affordability and further clarity on what requirements there may be for buy-to-let landlords.
She added that due to its manual underwriting process, it could look at applications on a “case-by-case basis” and would aim to do so.
A Lloyds Banking Group spokesperson said it was supportive of the Homes for Ukraine scheme and urged mortgage customers to keep them informed if they were taking part.
They said there be no change to rates if residential customers choose to rent a room out under the scheme and assured it would be acceptable under its existing buy-to-let mortgage conditions for landlords.
A Nationwide spokesperson said it was aware many members would want to support refugees via the scheme and it would waive charges for residential mortgage borrowers deciding to rent out their property through the scheme.
The typical charge for permission to let would be a one per cent increase on usual rates and members typically would not be able to switch to a new deal, but this would not be the case if borrowers let out their property through the scheme.
A Nationwide spokesperson added: “We’re still working through some of the details, including for buy-to-let landlords, and will add more information to our website in due course.”
A Leeds Building Society spokesperson said it would support the scheme and was looking at turning an unused part of its branch estate into emergency accommodation.
“The details of how it will operate are still being confirmed but we can say we’ll not be imposing any additional charges or increased interest rates for borrowers taking part in Homes for Ukraine. There will be no changes to our affordability criteria and the assessments of new mortgage applications across all of our lending will remain the same,” the spokesperson added.
A Yorkshire Building Society spokesperson said it was “definitely interested” in assisting the scheme but there were “nuances and details” it was exploring and it was waiting on further information for the government, UK Finance and the BSA.
A Virgin Money spokesperson said the firm was “still looking at how we can support it”, and a HSBC spokesperson added that it was “actively assessing how best to support this important initiative” and further details would be made available in due course.
A Barclays spokesperson said: “We’re fully supportive of this new scheme and we’re working closely with the government as details are being finalised. We want to help make it as simple as possible for homeowners to take part. We’ll update our website as soon as we know more.”
This was echoed by Santander, who said it was “proud to support” the scheme and it would be providing further information to mortgage and home insurance customers in due course.
Natwest said that it was in favour of the scheme but was awaiting further detail, and TSB added it was “urgently exploring ways we can make it possible for our customers to support Ukrainian refugees”.
A Coventry BS spokesperson said: “We want it to be as easy as possible for people to participate and are united with other UK building societies and banks in making it a straightforward process or homeowners.”
It urged mortgage members who wanted to take part to visit the government website for more information.
Research from Lloyds Banking Group of 880 adults found those living in the capital were the most dissatisfied with their local property market and 67 per cent expected prices to rise within three years, making it less affordable and attainable.
According to the latest Halifax house price index, property prices in London rose 5.4 per cent annually to over £550,000.
Concerns among Londoners include unaffordable house prices, with 68 per cent citing this, while half of the respondents said a lack of social housing was an issue.
Some 40 per cent said deposit requirements were an issue, while 44 per cent said there was not enough quality, affordable rental homes available.
Other concerns included a lack of new homes being built, as cited by 31 per cent of respondents, a quarter said economic issues caused by the pandemic and 23 per cent said the impact of Brexit on the economy and supply chains.
Additionally, 45 per cent said homes were not being built where people wanted to live and 55 per cent said homes did not meet the needs of their local area.
As for what London-based buyers want from their homes, two-thirds said good transport links, nearly half wanted to live near sufficient amenities and 43 per cent wanted to live in an attractive area.
Some 39 per cent wanted to live near family and friends while 28 per cent wanted a big garden.
Simon Kenyon, Lloyds Banking Group’s ambassador for London, said: “House prices and transaction volumes, even among first time-buyers, have remained strong during the pandemic. However, this research also shows that many people in London consider the continued strength of prices as the biggest factor preventing people from accessing quality and affordable homes.
“Understanding these local trends, will be vitally important in ensuring the homes being built keep pace with the changing needs of individuals and local communities. That’s why, as part of our commitment to help Britain prosper, we are working across the industry to collectively work out how we deliver the high-quality, sustainable and affordable homes that London needs.”
Marc Vlessing, CEO of Pocket Living, one of London and the South East’s affordable housing developers, said: “The findings of this research echoes what we hear all the time from aspiring first-time buyers; Londoners want a space they can call their own without having to compromise on the many benefits of city living.”
Pocket Living has partnered with Lloyds to help deliver discounted homes in London.
Vlessing added: “If we are to accelerate this to the next level, we need to see ambitious planning reform that encourages greater innovation in the market and that unlocks the potential of urban brownfield sites for affordable housing.”
