MPowered Mortgages joins IMLA
With the addition of MPowered Mortgages, IMLA now has 65 full and associate members, including banks, building societies, non-bank lenders and mortgage service providers.
MPowered recently launched its prime-residential mortgage range, which aims to make the mortgage application process quicker and more certain, using AI, data science and machine learning.
Emma Hollingworth (pictured), distribution director, will be appointed IMLA representative.
She said: “We are delighted to join IMLA, an organisation which brings huge value to both its members and the wider mortgage industry. We are looking forward to taking part in the important conversations driving change within our sector – in particular, when it comes to the role of technology in offering both brokers and their customers a smoother homebuying experience.
“We believe it’s crucial that the industry adopts technology to simplify the mortgage journey for homebuyers. This is more important now that it has ever been given the rapid rise in the cost of living and the expected increase in mortgage rates putting extra pressure on brokers to secure mortgages as quickly as possible for their customers.”
Kate Davies, executive director of IMLA, added: “We welcome MPowered Mortgages to IMLA, where we value the diversity of our membership as we unite to effect positive change within the mortgage industry.
“We look forward to MPowered Mortgages’ contribution as we continue to work together to create an even brighter future, improving outcomes for our members, the industry and homebuyers.”
Bank of Ireland UK appoints head of home buying and ownership
Brown (pictured) has worked at the bank since 2001 and has held roles including project manager as well as sales and relationship manager.
He was appointed to the bank’s senior management team in 2014, with his most recent role being head of strategy, governance, risk and quality assurance.
George Higginson, director of Northern Ireland, partnerships and mortgages, said: “I would like to congratulate Martin on his new appointment. Martin brings a wealth of experience to this important role, as we continue to successfully deliver our focused, niche mortgage strategy and strengthen our relationships with brokers.”
Brown added: “I am excited to be taking on this new role and feel privileged to be part of a dynamic team of experts who continue to evolve our award-winning bespoke proposition and roll-out new propositions and services, enabled by our investment in enhancing our digital capabilities.”
Data, tech, and honest advice are key tools against affordability woes – poll result
Inflation is at a 40-year high and Office for National Statistics (ONS) data has revealed that 23 per cent of UK adults are finding it difficult to pay household bills.
The latest Mortgage Solutions’ poll revealed that an overwhelming majority of brokers, 63 per cent, were seeing their clients already start to struggle with affordability while 37 per cent said they were not.
‘This situation is only likely to get worse.’
Tanya Toumadj, CEO at Mortgage Broker Tools (MBT), said data from the MBT Affordability Index and its previous white paper reflects the sentiment of most of our respondees.
She added: “More customers are struggling to demonstrate the affordability they need to borrow the loan sizes they request. In January 2021, only 18 per cent of customers were offered a loan size smaller than they requested, but in April this year, this had risen to 23 per cent of customers.
“This situation is only likely to get worse.”
Ian Hewett, adviser at Aims Financial and The Bearded Broker, reported that while none of his current client base is struggling, but there are signs the wind is changing.
He said: “I have had a couple of enquiries from single applicants, and they are going to get hit hard with the affordability calculator used. With only one income stream and bills increasing faster than the details on Sue Grays’ report, it will be a more challenging landscape for those individual borrowers nearer the ONS national average wage.”
Greg Cunnington, COO at LDN Finance, feels first-time buyers are “definitely feeling the pinch now more than ever.”
“I suspect renters will be mainly impacted by the cost of living rises, but we have not seen it impact those buying. We continue to see a huge desire for first-time buyers to get on the ladder or for home movers to upgrade.
“In the higher loan space it has not had any impact at all, as those higher net worth individuals are much less impacted. The £1m plus market is as hot as ever right now.”
However, Robert Payne, director at Langley House Mortgages, reported that buyers were already borrowing at their maximum capacity “just to get on the ladder or upsize”.
He added: “Monthly mortgage payments are already significant for many borrowers and that was in the best possible circumstances. I think many will notice a real difference in disposable income and will have to cut down on luxuries.”
How should advisers handle affordability issues?
As ever, it is down to advisers to guide their clients through the gathering storm with the personal touch the industry provides.
Lewis Shaw, founder and adviser at Shaw FS, said: “The biggest tips to get the maximum borrowing are to clear off as much debt as possible, save as big a deposit as possible and then speak to a great local independent broker who knows the area.
“Getting on the property ladder is never a no; it can sometimes be not right now. If that’s the case, I help potential customers make a plan, and we review it three, six, nine or 12 months down the line and pick up where we left off.”
Imran Hussain, director at Harmony Financial Services, said: “The clients I have found that are having a problem with this are those with average incomes but large unsecured debts so the conversation is having to be had around what’s more important right now: the new car personal contract purchase (PCP) or actually purchasing a home. For the clients I speak to, it’s never a no without a reason provided so people can understand what the exact issue is and how to rectify it.”
Cunnington takes a more technical approach. He said: “There are quite a few options available from a mortgage perspective that can help. Buyers can extend the mortgage term to keep monthly payments lower, with many lenders now allowing terms of up to 40 years.
“For those lucky enough to have the deposit available, we have also seen an increase in interest only applications for the same reason. We have also seen more buyers than usual look to fix in for longer, to guarantee security over their monthly payments for a longer period.”
Hewett believes that making the right business partnerships is the right way to help clients.
He said: “I have partnered up with a utilities warehouse provider to try and ease some pressure and talk through cashback website options that are available to all my clients.”
Toumadj believes that the scope of the products advisers offer their clients could make a massive difference too.
She said: “Alternative types of products, such as second charges, or income boosters, can help customers increase their borrowing in a way that is managed and sustainable.
Scott Taylor-Barr, financial adviser at Carl Summers FS, said: “There are a number of lenders that have extended affordability rules for certain occupations; professional and key workers for example, so sometimes a client cannot get the mortgage they would like from the high street, but can get it from a lender offering these types of schemes.”
How lenders should respond
ONS data on normal items of household expenditure is going to feed into lenders’ affordability calculations in the coming months, and this will naturally reduce the loan sizes that are available.
At the same time, property prices continue to rise and a recent report by Rightmove said asking prices have hit a record high.
Rob Peters, principle at Simple Fast Mortgage, feels that lenders’ affordability calculators need to be updated in real time due to the pace of the economy as there is currently a “lag”.
He said: “If the economy continues down this inflationary path, lenders will certainly tighten their affordability belts further. However, some lenders are inherently more risk averse, while others are able to offer higher borrowing amounts reflected by higher charges and interest rates.
“The key danger is that pushing a client’s affordability to the maximum takes away the financial cushion. If things go wrong, these borrowers will find themselves in financial difficulty first.”
Taylor-Barr added: “The underlying data lenders use has changed, so the same household income will get a lower mortgage at the end of this year than they would have been offered at the beginning. That’s frustrating if your house hunt takes a few months, but more worrying if you have a mortgage already, as you could potentially be unable to remortgage away from your current lender. That’s not an issue if your lender offers good value deals to existing clients, but a big issue if not.”
Payne has a slightly different outlook. He said: “I have spoken to buyers who are due to view properties and had to tell them that they can’t borrow the amount they need, but there are some options that have been working really well, such as Nationwide’s ‘Helping hand’ scheme, which allows first-time buyers to borrow up to 5.5 times their gross income compared to the more common 4.5 times.”
However a lot of brokers want lenders to take a more data and tech-driven approach to affordability calculations, particularly once things settle down at the Bank of England, according to Toumadj.
She said: “The affordability gap is only likely to increase. Lenders may have some more flexibility in their calculations following the end of the Bank of England’s consultation on its three per cent stress affordability stress test. The Bank estimates that this change will allow six per cent of borrowers to get the loan they wanted.
“This could lead to greater personalisation and more appropriate loan sizes offered to individuals.”
Toumadj said lenders also need to take a borrowers’ rental payment history into account to “ease the squeeze.”
“There are currently millions of potential first-time buyers who clearly demonstrate that they can afford to pay rent every month, often at a higher price than a mortgage, but are excluded by current affordability calculations.”
“Ultimately, creating a more inclusive affordability environment will be a delicate balance between making affordability rules more flexible, while also protecting borrowers and the wider UK economy by making sure to lend responsibly. This can only be achieved through greater use of data and technology to help drive product development and selection,” she said.
Tech has adapted, but are advisers ready to adopt it? – Merrett
It’s been the most intense period of rate pressures and subsequent withdrawals many of us will have ever seen: The rising cost of living crisis and resultant affordability challenges, service challenges due to application volumes, and continually rising house prices fuelled by a lack of stock.
It’s been a balancing act between overwhelmingly positive market forces, application volumes in particular, converging with some of the most significant challenges I have ever known.
Suffice to say it has been tumultuous, often tortuous, and truly unprecedented. The one consistent point no matter who I speak to across the market is that they are ridiculously busy, “stacked” if you will, or there aren’t enough hours in the day. So, how do we address this?
Well, for advisers, I think the answer lies firmly with technology.
The advantages of tech
We have all embraced different ways of doing things supported by technology over the past couple of years in particular, so why should advisers’ practises and processes differ? At recent events I’ve attended, I have heard a great many excellent speakers within our industry talk about the benefits of technology, and the universally common word they use is “adoption”.
Any adviser worth their salt will have already adopted a decent CRM system to help them manage the caseloads throughout the stamp duty holiday and now the rate battle.
Surviving it without the organisational and prioritisation benefits a good CRM provides is beyond me. With the rate issue at the forefront, all advisers should be proactively contacting remortgage clients at least six months in advance as anything else could see them miss out on the best rates.
A decent CRM will give this information and many will also aid the communication process. If they don’t have this functionality it can be supplemented with a tool such as eligible. Many of our SimplyBiz firms use this, and the feedback has been overwhelmingly positive, with clients getting in touch before they come up on their adviser’s radar, it’s helping deliver good customer outcomes.
Another area where the benefits of adviser adoption has seen significant propositional improvement is in criteria and affordability research tools.
I personally assessed many of these in their infancy and in firms I worked for, it was felt they were not up to the standard of adviser criteria knowledge and expertise. Yet in the post-pandemic world of sweeping criteria change, I feel they are fundamental to any business.
They aren’t always the silver bullet and will never completely replace human expertise, but they do massively narrow the research funnel, saving, time, effort and, most crucially, countless phone calls. If every adviser used an affordability tool then that might get more people the home they want, as there are a great many scenarios that often yield unexpected results with lenders you may not imagine being the best outcome.
Finally, and most crucially from an adoption point of view, is mortgage connectivity – the ability to submit an application with a quick click.
A real time-saver and potentially the answer for last-minute rate withdrawals. This has been long promised and is finally gathering some real traction.
It’s great to see the main protagonists – Iress, Mortgage Brain and Twenty7Tec – collaborating to help drive this forward. Together, the message is far stronger, and we are now seeing more lenders make this functionality available.
Usage leads to progress
What is crucial now is advisers engaging with these processes and adopting them into their business. The greater the usage, the more this will be prioritised and progressed.
It is now incumbent on the technology providers to remain transparent about demonstrating what stage they’re at with each lender. If we can have absolute clarity on who you can do a decision in principle (DIP), full mortgage application (FMA) or obtain case tracking with, then this will encourage more adviser engagement.
It is then over to the advisers in our market to save themselves time by making the next big step, adoption.
Aldermore’s Damian Thompson to depart – exclusive
Thompson has worked at Aldermore for just under five years, joining as director of mortgages in 2017, before being appointed group managing director of retail finance in 2020.
Thompson told Mortgage Solutions: “After five years I’ve decided now is the right time to move on from Aldermore. I’m immensely proud of what my team and I have achieved together and I want to wish Aldermore every success for the future. I now plan to take some time out with my family, before deciding what my next challenge should be.”
It was reported last week that Aldemore’s intermediary distribution head, Nick Parker, would also be leaving the firm.
Aldermore has declined to comment on Thompson’s departure.
A legacy to be proud of
Thompson previously worked at Newcastle Building Society as customer director for just under a year. At the mutual he was also an executive director where he oversaw operations, marketing, mortgages, savings and financial services.
He also spent nearly eight years at Principality Building Society in various senior roles, including director of distribution and head of retail.
During his tenure, he oversaw Principality’s retail network, intermediary sales, telephony and digital distribution. He also led the development of its agency acquisition programme, which changed their distribution, and put in place a society-wide customer interaction programme.
Before that he worked at HBOS for nearly six years, initially as head of network sales and marketing for nearly two years and then area sales manager for around four years.
Nationwide ups select resi rates by up to 0.2 per cent
The changes come into effect from 5pm on Friday 20 May.
Rates are going up by around 0.15 per cent across the board for new business across first-time buyer, new member movers, shared equity and remortgage ranges.
For first-time buyers, select rates will be increased by between 0.05 per cent and 0.25 per cent, and for homemovers, rates will rise by between 0.02 per cent and 0.20 per cent.
Select remortgage product rates will be upped by around 0.10 per cent and 0.35 per cent.
In its existing business range, rates are increasing from 0.05 per cent to 0.15 per cent for select moving home, shared equity, additional borrowing, green additional borrowing, switcher and switcher additional borrowing ranges.
For example, green additional borrowing has shot up from 2.09 per cent across the two and five-year fixed rate products at zero fee, to 2.29 per cent.
The lender also has upped switcher additional borrowing rates by 0.1 per cent.
A Nationwide spokesperson said: “The changes made to our new business range are reflective of the current interest rate environment, which has seen mortgage rates increase across the market. As a member-owned organisation we are not immune to this, and we need to ensure our new business mortgage rates are sustainable, whilst also ensuring Nationwide remains well-positioned in the market.”
Inability to meet EPC deadlines could hit landlord property disposals – Marketwatch
The most recent draft deadline is set to be extended from 30 April 2025 to 31 December 2025, with a further extension to 2026 expected. However, time is becoming a serious factor for landlords looking to not be penalised as the currently proposed 2025 and 2028 deadlines for existing and new and tenancies loom.
So, this week, Mortgage Solutions is asking: How realistic is it for professional landlords to get their properties up to required A-C EPC ratings within the proposed deadlines?
Akhil Mair, managing director at Our Mortgage Broker
There’s a lot of noise about this and market movement from a lender perspective, which is great.
Regarding the implications, it can be detrimental from two perspectives. Firstly, the cost. The costs of double glazing, boilers, loft insulation and lighting is going to be expensive. Can a landlord get a mortgage tomorrow or not? Can they change the properties and is it cost effective? Also how much will it disrupt tenants in situ and affect those relationships?
Second, the borrowing perspective – if they’ve got a low EPC rating and can’t improve it, does that mean the mortgage will seize? I fear that the EPC law could become a mortgage trap like the cladding issues.
In my experience, while they’re all aware of it, a lot of the landlords we work with are taking it lightheartedly as it’s further down the line, so as advisers we make a lot of noise about it. They’ve been asking for the green products as part of our fact finding exercises anyway.
We recommend A-C rated properties, but most of the older properties have an E or an F. Most can be brought up to spec with a light touch like a few bulbs, but it depends on the property itself.
Every disaster has winners and losers depending on how you look at it and how deep your pockets are. Will a cash buyer with a lot of capital be able to get around the rules because they’re buying in cash?
A lot of our clients are feeling it, they’re always improving their property to get a higher rent and longer tenancies anyway, so it’s something that should be on their minds regardless.
Jeremy Duncombe, managing director at Accord Mortgages
Upgrading properties to be more energy efficient is absolutely the right thing for the market to be aiming for, but the sheer logistics alone of doing so means the current deadlines are ambitious.
There’s a huge amount of property that falls outside the required A-C bandings, and the first deadline of 2025 for new tenancies is realistically, not far around the corner. With that in mind it will take a monumental effort for landlords to get their properties up to the required ratings, much of which will be outside their direct control.
We’ve seen the short supply of tradespeople compared to demand with post-pandemic home improvements, and with that, not only comes a time delay to projects, but significant cost too. Whilst lenders can help with funding, getting the required support from the relevant trades to improve such a significant number of homes feels a real challenge, so it may help to consider extending the deadline to help make sure landlords have adequate time to become compliant.
There are other challenges that may lead to unintended consequences.
If some properties are too far down the energy ratings to be improved within the timescales, we may see an increased number of ex-rentals come to the market as investors see selling-up as an option. Equally, we’re already starting to see landlords turning to new-builds to avoid this issue altogether, but that could create wider supply problems for a housing market that is already struggling to build enough homes.
Whatever happens, it’s vital that brokers are aware of the looming dates and are having good quality conversations with landlords to ensure they can make an informed decision.
Howard Reuben, owner of HD Consultants
For the ad hoc, smaller landlord, the costs could most likely be swallowed as a one-off exceptional maintenance investment, however for portfolio landlords who have a large number of properties sitting at a D or E rating, the prospect of increasing to a C could be not only time consuming, but also incredibly costly.
Older properties, for example the Victorian two-up two-down terraced houses which make up a substantial buy-to-let stock, will often need the most energy efficiency upgrades and with a mooted cost of £8,000 per property, which has been discussed in the press. If you multiply that by 4, 10, 50, 100… we can see the financial crisis, and the knock-on effects that this potential new regulation would create.
If the buy-to-let investors do not have the cash with which to upgrade, we could see the market flooded with non-compliant properties where the buy-to-let investors simply roll their eyes for the last time, and give up on what used to be a fairly passive ‘pension’ pot. The layers of costs, works, enhanced regulations and threats of fines for non-compliance has become too much for many people.
We have been encouraging our landlord clients to act now and a lot are already making changes to increase their rating. In turn, this is enabling them to receive market leading rates as the property can be more desirable, and also take advantage of green mortgages which offer a better interest rate for A-C rated properties.
If the proposed legislation is indeed introduced, for those who can’t or won’t upgrade their buy-to-let properties, we could see the landscape for the smaller landlord start to look quite different on the next few years. We fear for the larger landlords who may have hundreds of thousands of pounds to find too, and it is this sector where we could see the largest disposal of buy-to-let assets in to the owner-occupier market.
This is where we fear for those who choose, or need, to rent rather than buy.
Recent BTL offerings are still as dynamic as the changing market – Armstrong
This makes for a highly dynamic lending environment which is generating its fair share of opportunities and challenges for a range of landlords.
From a pure product perspective, let’s start this month’s round-up with some new entrants into some interesting areas of the BTL marketplace.
First up, CHL Mortgages entered the short-term let marketplace with the launch of a five-year fixed rate product range, up to 75 per cent loan to value (LTV).
This follows the recent introduction of a new product range by the lender for large Houses in Multiple Occupation (HMO) and multi-unit freehold blocks (MUFB), designed to cater for properties with seven to 10 bedroom or units.
Mansfield Building Society added lending to limited companies and expats to its holiday let offer. In addition to expanding its holiday let borrower types, Mansfield also increased the maximum LTV from 70 per cent to 75 per cent for holiday lets and its maximum loan size to £1mn for BTL.
The new holiday let mortgages, available to both individual landlords and Special Purpose Vehicle (SPV) limited companies, include a two-year discounted rate at 3.59 per cent variable and five-year fixed rate at 4.09 per cent.
Expats needing a holiday let mortgage will also be able to access a two-year discount at 4.19 per cent variable and a five-year fixed rate at 4.69 per cent.
West One Loans became the first lender to introduce a green second charge mortgage for landlords available on properties with an EPC rating between A to C.
The new green product is set at the lender’s lowest ever rate for BTL second mortgages starting from 5.29 per cent. In addition, the lender has created a new, second charge BTL plan called BTL Plus with rates starting at 5.39 per cent.
Fleet Mortgages launched seven-year fixed rates in all three of its core BTL ranges, which are standard, limited company and Limited Liability Partnership, and HMO/MUFB.
Advisers now have access to the new 75 per cent LTV products, available for purchase and remortgage, with standard and limited company/LLP options priced at 3.29 per cent, and HMO/MUFB priced at 3.59 per cent.
The products are available with a minimum loan of £25,001 up to £1mn and come with a rental calculation of 125 per cent at 3.29 per cent for standard and limited company and 125 per cent at 3.59 per cent for HMOs.
In terms of product changes, Accord Mortgages modified its BTL mortgage offering. The new range includes rate cuts on selected two-year products at 65 per cent LTV of up to 0.09 percentage points.
This includes a two-year fixed rate at 2.51 per cent, it was previously 2.6 per cent, available for remortgaging, which comes with a £495 fee, free remortgage legal service and free standard valuation.
The intermediary-only lender also reduced rates on selected products at 75 per cent LTV for landlords looking for two-year and five-year terms.
These include a five-year fix at 2.49 per cent, formerly 2.55 per cent, available for both house purchase and remortgage. It comes with a £1,995 fee, £250 cashback and free standard valuation.
Market Financial Solutions cut rates across both its BTL mortgage range and bridging loan products. The specialist lender’s BTL mortgage rates now start from 3.29 per cent, down from 3.79 per cent.
Finally, Clydesdale Bank has updated its BTL mortgage range with selected BTL 60 per cent LTV rates increasing by 0.15 percentage points.
This offers a good flavour of the breadth of activity on show across a BTL market which continues to demonstrate its flexible yet complex nature.
Government action needed to make green mortgages more attractive – Marketwatch
The proposals, which have yet to come into law, mean landlord’s properties should have an EPC rating of C or higher by 2025.
Generally, green mortgages aim to reward customers for making their properties as energy efficient as possible, preferably achieving an Energy Performance Certificate (EPC) rating of C or higher.
However, brokers have expressed doubts about the current benefits offered by green mortgages, and have made a few suggestions about what more needs to be done to make ‘going green’ more enticing for their clients.
In this week’s Marketwatch we address green mortgages and their impact on the market, borrowers and the environment.
Matthew Fleming-Duffy, director at Cherry Mortgage and Finance Ltd
It seems to be legislation that’s driven the market to create green mortgage products, as most people don’t ask for a green mortgage when enquiring about their borrowing options. Britain has a long way to go before these products really gain traction, but further legislation may be necessary to ensure homeowners are encouraged to transition away from fossil fuels.
It’s great to see lenders picking up on it though. Saffron Building Society, for example, is offering a two-year fixed rate at 2.07 per cent up to 80 per cent loan to value (LTV). The Green Mortgage Hub – launched by the Green Finance Institute at the end of 2021 – currently lists 36 products which offer financial incentives to owners or purchasers of energy efficient properties.
Landlords may feel particularly under the cosh, but they are particularly well-served in the market now with better pricing being offered by several lenders for properties that are energy efficient.
They are facing fines for non-compliance with the Minimum Energy Efficiency Standards legislation, and generally being unable to remortgage if their properties have an EPC rating below E. However, replacing halogen lightbulbs with LED bulbs and insulating the walls and roof are simple, low-cost ways to improve a property’s EPC rating. More expensive solutions like double-glazing and installing a new boiler may become essential as the government drives its legislative plan, which may mean some landlords decide to sell rather than consider such a cash outlay.
Lewis Shaw, founder at Shaw Financial Services
Green mortgages are a gimmick, a way for lenders to jump on the green bandwagon to get some of the kudos that goes with being a responsible and caring business pretending to care about climate breakdown and ecological collapse. They’re trying to prove they’re doing something positive about climate change, yet, at the same time, the big six and others are still bankrolling and investing in fossil fuel extraction and the fossil fuel industry – the same industry that has caused, and is continuing to cause, environmental destruction. Talk about bait and switch.
The majority of green loans are for category A or B properties, which is fine on paper, but it’s a load of rubbish in practice because the new properties are actually built to poor standards. Most of the time the properties are still under construction when the EPC surveyors are looking at them and therefore make much of the rating up on assumptions based on current construction methods and principles, not through a proper post-build check.
The reality is that not a lot of these new homes are actually as energy efficient as we’re lead to believe. I suspect that once these sites are built, if you got an assessor out there they would be fine if they’d been built to the book, as you’re meant to, but new builds are notorious for having problems with the standard of development. They may have green mortgage labels on them but they’ve got heat holes all over a lot of them.
In that respect the green mortgages are almost exclusively for new builds, but they’re not a true reflection of the reality.
We need to overhaul the listed building status rules to allow owners to make old buildings more energy efficient. It’s great having all that history, but if we can make subtle yet efficient changes to them we’ll be able to fight the climate catastrophe instead of contribute to it while still enjoying their aesthetics.
Furthermore, the UK accounts for a very small amount of the world’s emissions without including our global footprint from imports. Around 40 per cent of our energy use is directly related to housing, but it’s such a small amount on a global scale, especially when the big six who are giving out “green mortgages” continue to lend billions to fossil fuel companies – it’s absolute nonsense.
Imran Hussain, director at Harmony Financial Services
Right now, I feel green mortgages have very little impact on the environment. Green mortgages could be perceived as a bit of decent PR by lenders right now as they aren’t really available to anyone purchasing an older property due to the EPC requirements as millions of UK homes will struggle to achieve a C or higher, so the market is pretty much just new builds.
It’s a great idea to encourage people to be more eco-friendly and that initiative is good, but we need government buy-in to ensure that all the properties in the UK are involved, not just new builds.
Whether or not a mortgage is green does not influence affordability in the slightest as clients’ borrowing is driven by income and current debts, but what is advantageous is the rates being ever so slightly lower so can save the borrower a few pounds per month. It’s a case of whether people have that money to invest, and many people don’t.
But, the government could give or lend £10,000 per house hold to be spent on energy improvements that would have to be proven to be spent on the home through receipts to avoid fraud, much like work expenses. They could simultaneously invigorate British manufacturing through providing specific grants for windows or home improvement products that are manufactured in the UK, making triple glazing cheaper because it costs thousands, as a long-term solution that also encourages British manufacturing and creates more jobs.
The government has reduced taxes on energy efficiency, so why not put a tax break or rebate on things like insulation and solar panels for lofts and walls? It needs to be worth the time and resources to make a property more energy efficient for the individual.
They could subsidise pensioners’ homes, keep the elderly warm and when they move or pass on it will still be a C for the next person.
The type of property matters too – with older properties there’s only so much insulation that can be installed, and insulation will have eroded over time unnoticed. If you’ve got a homeowner in a terrace then there are different things that they can do, or afford to do. They won’t be able to put up solar panels for example as they’ll end up on the neighbour’s roof, but rewiring with more energy efficient wiring could be an option.
Lenders could do something similar, but they have the problem that everything is about affordability. They could have a charge on the home, but not side-step Mortgage Market Review (MMR), to be sure that from a lender perspective it can be justified.
Ultimately we don’t want pensioners using their savings on home improvements, so if the government could match a limited low LTV loan, like they do with Gift Aid, then consumers could pay it back at capped low interest, like the base rate, or one per cent fixed, as the money would be deemed cheap. It could be a separate loan guaranteed against the property, or a charge on the property so the lender gets the money and interest back when the place is sold.
Rob Peters, principal at Simple Fast Mortgage
Green mortgages offer eco-conscious borrowers an ethically appealing mix of reduced fees and interest rates combined with a sense of ‘doing their bit’ for the planet. Ultimately the mortgage has nothing to do with it – it’s the property that’s green.
I don’t think that the incentives provided by green mortgages at the moment are really worth the investment. The key thing is that if the work you do is going to provide long term benefits and cost savings then it’s worth it, so you should look at the green mortgage incentives as a bonus, rather than the main reason to do.
We recently placed an investor in Scotland with a green mortgage. He was an expat with two properties, one was a B and one was a C rating. He took a green product deal on the B-rated property and it provided 0.75 per cent saving in lender fees, a 0.15 per cent lower interest rate and £500 cashback. Overall, the client was almost £3,000 better off over the five-year term based on the loan amount.
But the question was whether it was worth him bringing the other property up to a B and it just wasn’t worth it. It would have meant disturbing the tenants and the building costs would have been more than £3,000 incentive, so he went with a different option and dodged the hassle.
One in 10 would-be borrowers put off mortgage application due to poor credit
Poor credit scores could be part of the reason, as half of those surveyed by The Mortgage Lender (TML) did not know their credit score yet, planned to buy a property in the next year.
A sizeable one in 10 has also been put off applying for a mortgage as they believe they have a poor credit history.
Many have a limited understanding of how to improve their position, with nearly two thirds of respondents stating that they had never taken steps to improve their credit rating.
A further 13 per cent said they weren’t clear of what steps they should be taking to improve their credit situation.
Fewer than one in five of those surveyed said they had taken steps to improve their position.
Peter Beaumont, chief executive at The Mortgage Lender said: “The number of people who don’t know their credit score, despite wanting to make big purchases like buying a house, is a worrying trend. It shows there is a need for education among UK adults on what their credit score is, how it could impact major buying decisions such as home buying, and how to improve it.”
He added: “A small blip on a credit score shouldn’t mean they are automatically excluded from a mortgage. Specialist lenders can support, where often the high street cannot, by offering products suitable for those with less than perfect credit scores. Talking to a mortgage broker will help to ensure you can find lenders that can help with your property ambitions.”