The Retrofit Explorer tool offers an accurate, transparent view of the upfront cost and returns of retrofitting a home. It also recommends cost-effective methods for energy upgrades. 

This will be integrated into the Octopus Real Estate website to encourage retrofitting and bolster green residential lending. 

It will work in conjunction with Octopus Real Estate’s green product offering, which comprises refurbishment loans to fund up to £200,000 of works. Where a property’s EPC rating has been improved following works, borrowers will benefit from a 1.8% per year discount on the interest rate. 

Octopus Real Estate said that, when it came to making homes more efficient, borrowers were faced with the challenges of not understanding the costs, the return on investment and being unaware of what works to undertake. 

The lender said this partnership was a “no brainer” as it would help to decarbonise housing in the UK. 

Joe Webb, chief growth officer of Kamma, said: “Retrofitting offers benefits on many levels, reducing emissions, saving on energy bills and even adding to asset value. It further reduces transition risk, supports transition planning and limits financed emissions for lenders.

“In this context, the lack of actual activity in the market has been surprising. We aim, for the first time, to make these benefits clear to consumers and lenders alike, driving up retrofit activity and driving down emissions and energy bills.” 

Steve Matthews (pictured), head of residential lending at Octopus Real Estate, said: “We want to offer genuine incentives to customers seeking to borrow to improve their property investments. We’re delighted to partner with Kamma, who clearly illustrate the benefits from making positive changes.

“Together, we’re aiming to drive genuine change and improve the availability of quality, sustainable homes.” 

Last month, Octopus Real Estate revealed it had completed over £35m in green homes lending through the Greener Homes Alliance initiative. The scheme is in partnership with Homes England and offers discounted rates to developers to encourage energy-efficient projects.

The initiative is in partnership with Homes England and sees Octopus Real Estate offer discounted rates to developers delivering energy-efficient homes. 

The loans issued by Octopus Real Estate to four SME developers have funded the development of 124 homes in Dover, Wandsworth, Wimbledon and Tottenham. 

The project in Nonington, Dover, is for 27 homes, including six affordable properties. The site was a former factory and storage yard and will be regenerated for the development. No fossil fuels will be used to power the completed homes, as they will be heated by air-source heat pumps. 

The scheme in Wandsworth, London, includes eight apartments. The project is part of a conversion scheme where a disused building will be regenerated into energy-efficient homes. The regeneration process means less carbon will be emitted during the development. 

There are also seven apartments being developed in Wimbledon, London, which will be fitted with solar PV panels and air-source heat pumps. Additionally, a previously vacant café will be converted into housing. 

The last project is for 76 apartments and two commercial units in Tottenham, London. 

Nick White, head of development origination at Octopus Real Estate, said: “We are extremely proud of the impact our Greener Homes Alliance initiative is having on supporting developers looking to make greener decisions for their projects. Our partnership with Homes England has delivered amazing homes, meeting the highest environmental standards while having a lasting positive impact on local communities. 

“As a B Corp, Octopus Real Estate is committed to providing quality, sustainable homes, and accelerating green initiatives within the property market.” 

Some £175m was pledged through the Greener Homes Alliance and the homes must have a minimum EPC rating of B. Octopus Real Estate will offer borrowers a two per cent discount on the interest rate if the EPC rating is A. 

In her new role, Herod will be responsible for a team of underwriters, to oversee the assessment of a variety of development transactions across various sectors including the residential sector, care homes, retirement and purpose built student accommodation.

Overall, the development lending team is 13 strong and headed up by Andy Scott, with Nick White the head of origination, Nora Rebole as the head of development portfolio with Herod now head of credit.

Herod has a depth of experience in the industry and prior to her promotion, she was a senior credit manager for two years.

Before she joined the Octopus team, Herod spent 16 years at Lloyds Bank, where she held roles within the corporate and institutional debt team, the Business Support Unit, and relationship management teams across the banking group’s real estate and trading businesses.

One example of a recent loan provided by the development lending team is the £37 million loan to Sheen Lane to finance the redevelopment of a vacant office block into flats.

Helping to deliver sustainable property lending

Herod said: “I’m really excited to be leading the credit team going forward and continuing to expand our development lending offering to help deliver much-needed sustainable properties across the UK.”

While Andy Scott, the head of development lending of Octopus Real Estate, added: “Sam is a huge asset to Octopus and I’m very pleased that she is now heading up our credit team.

“She has fantastic property lending experience and has a growth mindset that is focused on delivering great outcomes for our developers and introducers, through innovative and bespoke lending solutions across the living sectors.”

According to a report from Octopus Real Estate, nearly half of respondents are not confident they will be able to maintain their development at the same levels as last year.

The report attributed this to a “perfect storm” of pressures in social housing. This includes inflation, construction costs, higher interest rates, decarbonisation work, regulatory and policy-related pressures, and cost of debt.

Octopus Real Estate said that it was more challenging to make affordable housing development projects financially viable, with increased build and finance costs leading a third of Housing Associations reporting a deficit of 11 to 25 per cent on individual development schemes.

The recent seven per cent rent cap on social housing rent has led to an £3.2bn loss in rental income for registered providers.

London-based housing associations said that members were cutting development programmes by as much as a third, with other providers noting that they has reduced development by over 40 per cent due to financial conditions.

The report continued that housing associations have chosen to focus on improving their current housing stock, with overall spend on repairs and maintenance increasing from £5bn in 2018 to £6.5bn in 2022.

Octopus Real Estate added that spending on existing stock was expected to grow further due to the government’s review on Decent Homes Standard and increased scrutiny of social housing quality following the death of Awaab Ishak.

Simulating housing delivery

Professor Alex Lord, lever chair of town and regional planning at the University of Liverpool, said: “How do you address the housing crisis without the essential evidence and analytical tools to plan proactively for new development? Octopus’s report represents an important step in addressing this question by presenting evidence on the effects of current housing policy on registered providers of social housing.

“It is these registered providers — numbering over 1,500 in the UK — that will be essential to delivering the new affordable dwellings that the country so urgently requires.”

He added: “Yet the findings of this research suggest that these providers are unable to fulfil their purpose; those surveyed expect a significant reduction in their development pipelines over the short-medium terms.

“There is a considerable gap between aspirations and what registered providers expect to materialise over the coming years. This timely and important intervention from Octopus presents a clear case that we need to think again about stimulating the delivery of new affordable homes.”

Cost of debt has ‘soared’

Octopus Real Estate noted that housing associations had previously been active in debt facilities to fund projects, but as interest rates have increased dramatically, very few providers were active in debt capital markets.

The report noted that in the majority of cases registered providers were avoiding raising debt altogether.

Jack Burnham, head of affordable housing, Octopus Real Estate, said: “Registered providers have historically relied on private finance to support their development ambitions. But changing economic conditions mean that the cost of debt has soared and social landlords must now pay more to access the finance they need to build new homes.

“This pressure has been compounded by the enormous investment required for landlords to hit net zero targets as well as addressing issues of disrepair in the sector.”

He added: “In producing this report, we’ve had many conversations with key figures in the social housing sector. This has provided valuable and reliable insight into the position that many registered providers find themselves in today.

“When considering the competing pressures in the affordable housing sector, it’s clear that a crucial decision needs to be made. Registered providers can continue business as usual and hope for increased grant rates from government, or they can look for innovative solutions — as they have done in the past — which can help deliver the homes the country needs. Consensus suggests that registered providers are now looking towards equity partnerships as a solution.”

In the newly created role, White will work within the firm’s residential development lending team, and will have particular responsibility for generating opportunities in two of Octopus’s core specialisms, care homes and retirement communities.

White joins from Fortwell Capital, where he was a director, responsible for development lending across the residential and senior living sectors. In that post he was responsible for Fortwell entering the retirement living market, and oversaw its increased exposure to care homes.

Andy Scott, head of residential development at Octopus Real Estate, noted that to date, the lender has focused on clients in the residential and student accommodation sectors, though it has been working on expanding its offering into other asset classes like care homes and retirement living.

He continued: “With his experience across these sectors, Nick is the perfect person to spearhead this expansion and help us take full advantage of the plentiful opportunities in the residential lending space.”

White said that the lender was a “genuinely entrepreneurial business”, adding: “I’m excited to have the unique opportunity to link up with the other teams in the Real Estate business to find origination prospects across the UK that deliver a positive impact across society.”

Octopus Real Estate specialises in property lending and investment and launched to the market in 2005. It now has over £2.7bn assets under management.

On the lending side it offers residential bridging, commercial bridging, auction loans, commercial term loans, development loans and greener homes alliance loans and buy-to-let loans. To date it has lent more than £4.5bn.

Steve Matthews, head of residential lending at Octopus Real Estate said: “We’re delighted to partner with Mortgage Brain. The data analysis service provided by the team will give Octopus Real Estate valuable insight that will help us to better understand the needs of our broker partners.”

He added: “In recent months increasing numbers of borrowers have turned to specialist lenders, but the right products are not always easy to find. By hosting our specialist products on Mortgage Brain, we hope to raise awareness of our offering, thereby better supporting intermediaries with their requirements and those of their customers.”

Neil Wyatt (pictured), sales and marketing director at Mortgage Brain added: “Octopus Real Estates offer some great options for intermediaries. Ensuring that the products that are available to all of our users on the system reflect the market is vitally important and we are delighted that Steve and the team see the benefit in partnering with Mortgage Brain.”

The lender said that the funding will allow it to target smaller commercial investment loans worth up to £25m with two-to-five year terms. Octopus said this is an area that is currently under-served by lenders, but where its debt platform is already established.

PwC acted as lead adviser to Octopus on the funding agreement with Bayview, which is an investment management firm which focuses on mortgage and consumer credit.

Benjamin Davis, CEO of Octopus Real Estate, said the partnership highlights the opportunities offered to local and institutional investors by the UK property market.

He continued: “With specialist expertise across the residential, commercial and development sectors, Octopus is uniquely positioned to deliver upon the demand from institutional investors for high-quality, diverse real estate assets that meet a range of investment criteria.”

Zhu Gong, head of European structured credit at Bayview, added: “At Bayview, we continue to search for and grow strategic partnerships that offer innovative funding solutions in often under-served markets. We welcome this opportunity to work with Octopus, whose expertise will help us gain exposure to high-quality UK small-balance commercial real estate loans.”

Octopus last year formed a ‘Green Alliance’ with Homes England, which saw it commit to lend £175m of discounted loans to developers building energy efficient properties, while it also announced a move into lending in Ireland.

The lender said its product will offer support to brokers and borrowers across the commercial spectrum, with borrowers offered access to bridging finance of upwards of €500,000 (£425,000) for all sorts of commercial transactions, including purchases, refinancing and equity release. It will be available across all asset classes, including land with planning permission for residential development.

The maximum loan to value is set at 70 per cent, with rates starting at 0.75 per cent per month. There are no exit penalties, an arrangement fee of 0.5 per cent, and term lengths stretching from one to 24 months.

The lender said this expansion is the first step in its bid to grow its presence across Europe.

Benjamin Davis, CEO of Octopus Real Estate, noted that Ireland was an important market for the lender.

He continued: “The Irish commercial property market is thriving, and the launch of our commercial lending product will enable the funding of developments of scale across the commercial spectrum. We have a reputation of providing best in class service and attractive lending rates. We believe this product, coupled with our experience in commercial lending, will be a positive addition to the Irish market.”

As part of the Greener Homes Alliance with Octopus, Homes England will provide £46m of the £175m of loan finance.

The alliance will provide loans of between £1m and £20m to finance new SME development projects.

Loans are capped at 85 per cent Loan to Cost or 70 per cent Loan to Gross Development Value.

Homes funded must achieve a minimum Energy Performance Certificate (EPC) rating of B and will benefit from increasing interest rate margin discounts as the energy efficiency of the homes increases above this, measured using the Standard Assessment Procedure.

Homes achieving an EPC rating of A will benefit from interest rate margin discounts of two per cent.

The alliance will support the construction of up to 750 new homes whilst also equipping SME housebuilders with knowledge and expertise around low carbon construction.

Before starting their developments, SMEs will benefit from free of charge advice from sustainability consultants McBains and Octopus Energy.

McBains will provide design guidance and practical steps to achieve an improved EPC.

Housing Minister Christopher Pincher MP said: “Our Future Homes Standard will ensure that from 2025 new homes produce at least 75 per cent lower CO2 emissions and be future-proofed with low carbon heating.

“This partnership will help reach our targets for cleaner, greener homes for future generations.”

Andy Scott, head of residential development at Octopus Real Estate, said: “Although green credentials may be an aspiration for most developers, sometimes access to funding, costs and education can stand in the way of these aspirations. The alliance will offer tangible discounts which can help fund the costs to support the delivery of green developments, plus access to advice and education, which will enable SME housebuilders to deliver future proof, energy efficient homes to be enjoyed for generations to come.”

The lender withdrew from the market temporarily in November 2018 but after rejoining it then pulled out in March 2020.

It has now returned “in response to the growth opportunity in the BTL market, which is becoming increasingly evident over the last few months”.

“With people’s working and living arrangements changing as a result of the Covid-19 pandemic, investment into BTL property has expanded beyond the traditional urban hubs to suburban areas, creating an opportunity for brokers and borrowers,” it said.

Octopus is offering a maximum of 75 per cent loan to value (LTV) on two and three-year fixes at 5.49 per cent up to £1m and up to 65 per cent LTV for loans more than £1m.

A five-year fix is available at 5.99 per cent at up to 70 per cent LTV for loans up to £1m and at 65 per cent LTV for larger loans.

Loans are available between £50,000 and £3m, and Octopus will accept short term lets, houses in multiple occupation (HMOs), semi-commercial and multi-unit freehold blocks at a maximum of 70 per cent LTV.

Expats, foreign nationals, first-time buyers and those with adverse credit are also eligible but reduced LTVs may apply.

The product will be available to all brokers, has no minimum income requirement and will be available for properties in England and Wales.

‘Right time to return’

D’mitri Zaprzala (pictured), head of residential at Octopus Real Estate, said: “We have always been committed to the buy to let market and now is the right time for us to return.

“We have spent the last few months speaking to and listening to our broker community to understand what they really want from a specialist lender.

“We found that brokers want a lender who is dependable, so we have put this at the heart of our product, which can support complex cases and address the underserved part of the market.

“The buy to let market is buoyant, driven in part by the resilience of the housing market during the pandemic, and we see a significant growth opportunity as people re-evaluate their living arrangements as we start to emerge from this latest lockdown,” he added.

Steve Matthews, head of buy-to-let sales at Octopus Real Estate, noted that the pandemic’s impact meant there was a clear opportunity for the buy-to-let market to unlock alternative homes for people.

“However, many borrowers are missing out on the opportunity as they don’t meet mainstream lending criteria,” he said.

“We want to change this. Working in partnership with our broker community, we think there is an exciting opportunity to grow the market and reach those underserved borrowers to allow them to take advantage of external market conditions.

“We’ve worked hard to develop a product that will enable us to deliver through popular transaction times and help a wide range of borrowers become landlords, realising the potential of a BTL investment.”