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Will green mortgages encourage landlords to improve energy efficiency?

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Landlords could get preferential treatment when applying for mortgages if their properties are energy efficient, as lenders begin to launch new green products to the market.  

This week, Paragon Bank launched a new range of buy-to-let mortgages which offer lower-deposit options to landlords whose properties have an Energy Performance Certificate rating between A and C.

It is offering mortgages with 20 per cent deposits to portfolio landlords who fit in to this bracket – less than the 25 per cent minimum that those with less energy efficient properties must put down.

Going green: Landlords who upgrade their properties to make them more energy efficient are being offered mortgage incentives, including lower fees and deposits

Going green: Landlords who upgrade their properties to make them more energy efficient are being offered mortgage incentives, including lower fees and deposits 

The five-year fixed rate is 3.99 per cent for a self-contained property and 4.19 per cent for an HMO, the latter of which is market-leading. 

Both are fee-free and come with £350 cashback, and they are available for both purchase and remortgage.

Paragon, a specialist lender, said it wanted to encourage landlords to invest in greener homes and increase the proportion of A-C rated properties in the market.

‘Lenders are offering these products to show that they are supporting environmental concerns,’ says David Longhurst, director at broker Connaught Private Finance.

‘With developers also now working to build greener houses it is only natural that they would then follow suit.’

So is the new loan offering enough of a money-saving incentive?  

Landlords with self-contained properties would probably be able to access an equivalent non-green labelled product with a better rate, but Paragon’s fee-free offer could be enticing. 

‘The equivalent non-green labelled product would cost less, around 3.5 per cent,’ says Mark Harris, chief executive of mortgage broker SPF Private Clients. 

‘But the Paragon rate benefits from no product fee and a free valuation, whereas alternatives could have arrangements fees of between £1,000 and 2 per cent.’ 

The cost of carrying out renovations to improve a home's energy efficiency means that, even with mortgage incentives, costs might not stack up for landlords

The cost of carrying out renovations to improve a home’s energy efficiency means that, even with mortgage incentives, costs might not stack up for landlords 

Under Government proposals, homes in the private rented sector will need a minimum EPC rating of C for new tenancies by 2025, and all homes in the sector will require that rating by 2028. 

The number of green products on the market is growing as landlords rush to get up to speed. 

Foundation Home Loans has launched a Green Reward Remortgage, which has a higher minimum deposit requirement of 25 per cent. It has a five-year fixed rate of 3.75 per cent, a and is available whether the property is held in a personal name or via a limited company.

It has a 0.75 per cent arrangement fee, which is lower than the lenders’ usual charge, and offers £750 cash back up to a loan size of £1m. 

Like the Paragon mortgages, it is also available exclusively to landlords with properties that have EPC ratings from A to C. 

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Paragon also launched a Green Further Advance product in February, which is designed to help landlords carry out upgrades to properties with EPC ratings of D or lower. 

However, landlords must have been accepted for a Government Green Homes Grant in order to apply – and that scheme has now been axed.

Richard Rowntree, Paragon Bank’s managing director of mortgages, says: ‘Landlords have made great strides in adding more energy efficient homes to the private rented sector – or upgrading properties to C or above standard – over the past decade. 

‘However, more needs to be done as the Government moves towards its net zero carbon target by 2050 and landlords have a key role to play in that.

‘Our new range of products at 80 per cent loan-to-value for homes with an energy rating of C or above will be an incentive for landlords to add energy efficient homes to the sector, benefiting tenants through lower energy bills and the environment through reduced consumption.’

Lenders’ motives may not be wholly altruistic, however, as there are signs that the Government could start to put pressure on mortgage companies to improve the energy efficiency of the homes they lend on.

Mortgage lenders may soon be required to track and annually disclose the average Energy Performance Certificate rating of the properties they lend against.

Landlords have been told that their lets must have an EPC rating of at least C by 2028. Older properties will be most in need of improvements to get them up to that grade

Landlords have been told that their lets must have an EPC rating of at least C by 2028. Older properties will be most in need of improvements to get them up to that grade 

The Government could then use this information to publish ‘lender league tables’ based on the average EPC ratings within their portfolios.   

If more lenders start to offer incentives to landlords with better EPC ratings, this could lead to reduced rates in future. 

There are currently about 29 million homes in the UK, of which 19 million have an EPC lower than C, according to the Government’s Climate Change Committee.  

Fitting loft, under floor or cavity wall insulation; upgrading to double or triple glazed windows; draught proofing and hot water tank insulation are just some examples of improvements that can boost an EPC rating.

Lenders have already offered incentives to home buyers with energy efficient properties for some time, and brokers say that this could be replicated in the buy-to-let sphere.  

‘A number of lenders in the owner-occupier world already offer more keenly-priced mortgage rates for greener or more efficient EPC-rated properties,’ says Harris.

‘It was only a matter of time before this was replicated in the buy-to-let sector.

‘Green finance and green mortgages have been rising up the agenda for the past few years, and we expect this to increasingly be the case.’

Upgrading their properties specifically to get a better mortgage deal might not always make financial sense for landlords, however. 

Matt Coulson, director at broker Heron Financial, says: ‘Existing property owners could invest in improved insulation or new windows, but the overall financial gains are small, in terms of securing a more favourable mortgage rate.

‘The real gain here is that all of these changes and incentives add up to making a difference to the environment and our move towards net zero.’ 

Energy efficiency for its own sake is something that many landlords may struggle to get on board with.  

Jeremy Leaf, North London estate agent, says both landlords and tenants currently have ‘insufficient regard’ for energy efficiency. 

The Climate Change Committee is proposing all UK homes reach an EPC of band C by 2028 in order to help the Government meet its net zero carbon target by 2050

The Climate Change Committee is proposing all UK homes reach an EPC of band C by 2028 in order to help the Government meet its net zero carbon target by 2050

‘It is only when utility charges are higher, for example, that people notice and are likely to change their behaviour,’ he says. 

According to the Department for Business, Energy and Industrial Strategy, the average energy running costs for a home with an EPC rating of C in England are around £300 cheaper than for a band D home, and £740 less than for a band E home. 

Tax incentives are another way that landlords could potentially be brought on board with the green agenda. 

‘In future, landlords will have access to lower rates and fees which will help increase the profitability of the property,’ says Longhurst. 

‘At the same time, the tax regime regarding maintenance versus improvements needs to be reviewed to encourage landlords to do more.’

Although access to better mortgages, the threat of higher bills and tax changes can all sweeten the deal, many landlords are likely to be incentivised most by the potential penalties if they do not upgrade their properties. 

The requirement to be at EPC grade C by 2028 is drawing closer, and those with older or less efficient properties need to be prepared.  

Mortgage lenders going green 

Green mortgages for landlords may only just be getting started, but they have been on the table for homeowners for some time. 

One in five lenders now has a mortgage in their range that offers lower rates for those with certain EPC ratings, according to the Intermediary Mortgage Lenders Association. 

A further 21 per cent offer mortgages with other financial incentives that encourage borrowers to improve their home’s energy efficiency.

NatWest has launched a green mortgage which offers a discounted interest rate to customers buying a home with an energy efficiency rating of A or B. The discount is usually 0.05 per cent. 

The bank is aiming for half of its mortgage book to have an EPC C rating or above within the next decade. 

Barclays also has a green mortgage offering, which gives buyers a 0.1 per cent discount on their interest rate if they buy a new build property with an EPC rating of A or B. The mortgage must be less than £500,000.  

Other lenders have taken a different approach. Kensington, for example, has launched a green mortgage which pays £1,000 cashback retrospectively to borrowers who make energy efficiency improvements.

In order to qualify for cashback through the eKo mortgage, customers must improve their home’s energy efficiency rating by 10 points based on the standard scoring system used by assessors. The changes must be made within the first year of completion.

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

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No reasons recorded for low rates of successful speeding prosecutions

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Fewer than one in five people prosecuted in court for speeding offences are being convicted, new data shows.

With a national average of just over 16 per cent, data covering a three year period between 2018 and 2020 shows conviction rates ranging from 7 per cent recorded in Co Mayo to 24 per cent in Co Wexford.

In total, of almost 60,000 court prosecutions, fewer than 10,000 concluded with a ruling against the driver.

While separate statistics show that 8,325 cases (14 per cent of total prosecutions) were either dismissed or struck out by judges, no information is available as to why.

“The Courts Service system does not record the reason a case was struck out unless the Judge includes the reason in their order,” Minister for Justice Helen McEntee told Social Democrats co-leader Catherine Murphy who had sought recent information around mobile phone use by drivers.

“As such, the Courts Service does not hold complete statistical information on the reasons for any case being struck out.”

Fundamental issues

However, Parc, the road safety advocacy group which has analysed the data, said such a gap in knowledge is among a number of fundamental issues it is to raise with senior garda management and the Road Safety Authority (RSA) in a forthcoming meeting.

“If we don’t know the reason why [cases are being thrown out] then how are we ever going to fix it,” said chairwoman Susan Gray.

“Why are they failing in court, why so many, why are some areas like Mayo recording so few convictions, why is no one looking into this? In Mayo where the RSA is based, [there was a conviction rate of] 7 per cent over three years.”

The counties with the four major cities – Dublin, Cork, Galway and Limerick – accounted for 24,387 prosecutions, or 41 per cent of the total, and had a conviction rate of 19 per cent.

Outside of those areas, the counties with the highest number of speeding offences ending up in court were Kildare (6,948), Louth (2,600), and Wexford (2,055). Despite being an outlier in terms of prosecution rates, Kildare saw a conviction rate of just 10 per cent, the third lowest of 26 counties.

Conviction rates were the highest in Wexford (at 24 per cent) but three quarters of prosecutions still fell down for whatever reason. Following Wexford, drivers were most likely to be convicted in Dublin, Donegal, Longford and Westmeath (each 22 per cent), Louth (21 per cent) and Limerick (20 per cent) but no other county reached the 20 per cent mark.

Drivers were far less likely to see a conviction recorded against them in Mayo (7 per cent), Meath (8 per cent) and Kildare (10 per cent).

Catherine Murphy said the data raised a number of issues and exposed a traffic penalty system in need of greater consistency and cohesion.

“There can be a huge differential depending on what court you end up in and that shouldn’t be the case,” she said. “You would expect to see this [conviction rate] almost the reverse way around.”

She said there was no reason why data should not be recorded that shows why prosecutions do not proceed, or fail and that the overall road safety enforcement system required a less fragmented approach.

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BNP Paribas REIM acquires Barcelona office building (ES)

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BNP Paribas REIM acquires the iconic office building “Tanger 66” located on 66 Calle Tanger, in the 22@ District in Barcelona, from Blue Coast Capital. This asset is an emblematic building and an architectural landmark in Barcelona, with a total surface area of 7,211m². It is strategically located in the 22@ District, which is one of the most sought-after office area in Barcelona and a European hotspot. The District 22@ is a neighbourhood that used to house industrial sites before becoming one of the most important urban renewal projects in Europe and being rehabilitated to provide modern and elegant offices designed to meet the needs of businesses. The neighbourhood is now composed of more than 1,500 companies specialised in IT, energy, design, media or scientific research and is considered today as a space for constant innovation.

 

The “Tanger 66” building was re-developed from a textile factory into the first LEED Platinum office in Barcelona by Blue Coast Capital. It is composed of 4 floors and an 800m² terrace garden in the upper floor. It offers modern working spaces with training areas, collaborative spaces, computer laboratories, an auditorium and a cafeteria. The building benefits from an excellent connection to public transportation with metro, tram, bus and train stations only a few minutes away. It is fully let to Hewlett Packard.

 

Jean-Maxime Jouis, Global Head of Fund Management for BNP Paribas REIM commented: “This acquisition strengthens the BNP Paribas Diversipierre fund portfolio and fits perfectly with the fund’s strategy by adding a modern asset, fully let and located in a strategic location in Barcelona. In addition, the building is certified LEED Platinum, therefore it respects the funds’ commitments and more generally the environmental issues targeted by BNP Paribas REIM, whose strategy is to accelerate its funds’ goals in terms of ESG.”

 

Fraser Denton, Managing Director, European Real Estate for Blue Coast Capital said: “I am delighted for BNP Paribas REIM in finalising this transaction. Our re-development of T66 is an excellent example of Blue Coast Capital’s focus on creating exceptional real estate and is a leading example of real estate repurposing whilst achieving the highest level of LEED Certification.”

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House prices shot up £25k in a year in November 2021, ONS says

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Property prices surged 10 per cent annually in November 2021, according to the latest official figures.

This marked a small increase in price inflation compared to October, when prices grew by 9.8 per cent, the Office for National Statistics’ house price index shows.

The average house price was £271,000 in November 2021, which is £25,000 higher than the same time last year.

Climbing: The average UK house price increased by £25,000 in the year to November 2021

Climbing: The average UK house price increased by £25,000 in the year to November 2021

The figures confirm that house prices continued to climb, even after the stamp duty holiday finished at the end of September 2021.

The tax break, which lowered home buyers’ bills by up to £15,000, contributed to rapidly rising prices after it was introduced in July 2020.

This was despite the cost of a home increasing by £10,000 more than the maximum tax break.  

The number of housing transactions taking place also increased in November, growing by nearly a quarter compared October according to HMRC.

However, it was 16.4 per cent lower than the number of transactions in November 2020.

This suggests that the slight dip in October following the end of the stamp duty holiday may have been a temporary blip.

Rise: The rate of house price growth ticked up in November compared to October

Rise: The rate of house price growth ticked up in November compared to October

The average UK house price has increased dramatically since the pandemic started

The average UK house price has increased dramatically since the pandemic started

Phillip Stevens, director of Richmond estate agency Antony Roberts, said: ‘It was business as usual in November as property prices rose again following October’s dip, which came about following the end of the stamp duty holiday. 

‘There is plenty of evidence that buyer demand remains strong, especially for houses, and with relatively little stock available it is a house seller’s market.’

However, experts said that the spectre of rising inflation and increases in the cost of living could serve to dampen the housing market later in 2022.

On the market: This four-bed, three-bath detached home in Kirkby Lonsdale, Lancashire, is on the market with Hackney & Leigh with an asking price of £745,000

On the market: This four-bed, three-bath detached home in Kirkby Lonsdale, Lancashire, is on the market with Hackney & Leigh with an asking price of £745,000

In Trowbridge, Wiltshire, this five-bed is listed for £610,000 with agents Kingstons

In Trowbridge, Wiltshire, this five-bed is listed for £610,000 with agents Kingstons

Buyers in Largs, North Ayrshire, Scotland can snap up this four-bed, two bath detached home for £299,000. It is listed with estate agents at Corum

Buyers in Largs, North Ayrshire, Scotland can snap up this four-bed, two bath detached home for £299,000. It is listed with estate agents at Corum

This Victorian three-bed is marketed with Starkings & Watson in Norwich for £375,000

This Victorian three-bed is marketed with Starkings & Watson in Norwich for £375,000

This two-bed cottage near Hereford is being sold by Chancellors with a £210,000 guide

This two-bed cottage near Hereford is being sold by Chancellors with a £210,000 guide

This depends to some extent on whether there are further increases in the Bank of England’s base rate, which would likely push up the cost of a mortgage.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘There is further speculation that the Bank of England will raise interest rates by 0.5 per cent at its February meeting in order to counter rising inflation, and it remains to be seen what impact this will have on buyer confidence.

‘Squeezed affordability would be an issue, preventing first-time buyers in particular from getting on the ladder.’

Looking at the different countries of the UK, house prices increased 9.8 per cent over the year in England to reach an average of £288,000.

In Wales they grew by 12.1% per cent to £200,000, in Scotland by 11.4 per cent to £183,000 and in Northern Ireland by 10.7 per cent to £159,000.

The South West was the region with the highest annual house price growth, with average prices increasing by 12.9 per cent in the year to November 2021. This was up from 10.8 per cent in October 2021.

The lowest annual house price growth was in London, where average prices increased by 5.1 per cent over the year to November 2021, down from 6.7% in October 2021.

Despite being the region with the lowest annual growth, London’s average house prices remain the most expensive of any region in the UK at an average of £520,000.

Locations: Regionally, the South West saw the highest house price increases at 12.9%

Locations: Regionally, the South West saw the highest house price increases at 12.9% 

The North East continued to have the lowest average house price at £149,000, but prices still increased 8.7 per cent in the year to November.

The fact that the number of homes on the market is much lower than the number of interested buyers is another factor continuing to drive up prices, along with Britons’ desire to change their living arrangements due to the pandemic.

Nick Leeming, chairman at estate agent Jackson-Stops said: ‘Last year proved to be an astonishing year for the property market, with prices and demand defying expectations set by the pandemic in January. 

‘Whilst today we see average house prices up slightly from those recorded in October, the figures still reflect lack of supply in the market and are therefore impacting levels of demand in the year to November 2021.

‘It is evident that this imbalance between stock and demand will continue to underpin housing activity in coming months. 

‘This is reflected by what we are seeing across our branches where the complex and ongoing changes to the nation’s working patterns and lifestyle aspirations have only heightened the importance Britons place on owning a home.’

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

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