Green mortgages have been around in one form or another since 2006, when Ecology Building Society launched their first product of this type in the UK. Until now they've remained a fairly niche product, with a fair amount of crossover into the self-build mortgages market.
Now, with the government awarding a £4.1m grant to lenders willing to offer green finance projects, could this be the beginning of the rise of green mortgages? The grant is part of the government’s broader £20m Green Home Finance Accelerator scheme, which is funded through the £1bn Net Zero Innovation Portfolio.
It will fund 26 home energy efficiency pilot projects, which vary by lender, but all incentivise customers to buy a greener property, or carry out green home improvements to their existing ones.
Landlords will be pleased to hear that some of the funds have been allocated towards buy-to-let products, especially with the 2028 deadline to meet the new minimum EPC ratings for rental properties looming ever-closer. Green improvements are going to be essential to many landlords looking to continue operating residential lettings beyond 2028.
So far, Aviva Equity Release UK Limited has received £87,612 to design a specialist lifetime mortgage product that frees up cash to improve the energy efficiency of homes. Virgin Money was granted funding of £171,000 to design a product which offers bespoke energy efficiency products based on a survey of the customer's home to outline any green improvements needed. They are partnering with Rightmove and energy tech brand, Sero.
Ashman bank have also received £200,000 to design a similar scheme, but aimed at buy-to-let customers. They'll provide an assessment of any energy efficiency improvement necessary, with a focus on meeting minimum EPC requirements. Landlords are expected to be able to add the cost of borrowing for these improvements to their mortgage.
Some lenders have chosen to use the scheme to offer better rates to those meeting green targets. For example, Perenna Bank will use their award of £193,350 to create a long-term fixed-rate green mortgage with reduced rates for those willing to retrofit their homes with environmentally beneficial upgrades.
Many other lenders are expected to make use of this grant to introduce green incentives as part of this scheme, but it remains to be seen how they will choose to use the funding.
The previously delayed Renters Reform Bill has will finally be discussed in parliament today. The white paper includes the much anticipated abolishment of Section 21, meaning no-fault evictions will be a thing of the past, assuming it passes through parliament.
What the bill would mean for landlords if published:
They would need to establish fault on the part of the tenant in order to evict them
They would not be able to refuse a reasonable request for tenants to own a pet
They would not be able to refuse a tenancy to benefit claimants purely on that basis
They would not be able to refuse a tenancy to families with children on that basis
They would need to give two month's notice (not one) of any rental increases
Their properties would need to meet the same 'Decent Homes Standards' legislation as used in the social housing sector
They would no longer be able to use fixed-term tenancies, with open-ended tenancies replacing them
They would need to register on a new property portal, which shows tenants whether they are compliant with relevant regulations
They would have greater powers to repossess their properties for repeated non-payment of rent or anti-social behavior through Section 8
They would have greater powers to reduce notice periods for tenants who have breached their tenancy agreements or caused damage to the property
The bill is also expected to be enforced by a new ombudsman, which would also perform a mediator role between landlords and tenants to resolve low-level disputes outside of the courts. It has come under heavy criticism from several Conservative MPs and NRLA (National Residential Landlords Association) who are concerned that the bill is unfairly balanced against landlords.
NRLA chief executive Ben Beadle said “Responsible landlords need to be confident that when Section 21 ends, where they have a legitimate reason, they will be able to repossess their properties as quickly as possible. Without this assurance, the bill will only exacerbate the rental housing supply crisis many tenants now face." He stated that “We will continue to work with the government, MPs and peers to ensure the bill is workable and fair to both responsible landlords and tenants.”
In a move welcomed by many landlords, but few tenants, last week the government announced another delay to the publication of the long-awaited Renters Reform Bill.
Since it's conception back in 2019, during Theresa May's leadership, the bill has undergone multiple setbacks. Based on research that suggested more than one in five private renters who moved between 2019 and 2020 did not choose to do so, the bill is intended to re-balance the power in the typical landlord tenant relationship.
However, NRLA (National Residential Landlords Association) research shows that there is a great deal of concern about the bill among landlords, with 76% feeling their business is threatened by it and a whopping 93% saying it would increase the financial risk to their chosen livelihood.
Although rents, and indeed, rental demand are at peak rates in the UK, the impending Renters Reform Bill, alongside tax changes, stricter private rental regulation and rising interest rates has already resulted in somewhat of a 'mass exodus' of buy-to-let landlords. According to research consultancy BVA-BDRC, 33% of private landlords in England and Wales planned to cut down their rental portfolio in the first quarter of 2023.
At the current time, the government has cited 'procedural issues' as the reason behind the delay in the bill's publication, however, they are yet to provide a new publication date.
NRLA has warned that even post publication, the new legislation could take 12-18 months to become law. They feel that without immediate government action in relation to the bill and other elements souring the appeal of becoming a landlord, current rental property shortage in the UK will increase.
Chief executive, Ben Beadle stated “The Government needs to reverse its damaging tax hikes on the sector, which have discouraged the provision of the homes tenants desperately need”.
Meanwhile, there have been unaccredited claims in recent days that a number of Conservative backbenchers, including some who hold their own property investment portfolios, have been lobbying against the 'anti-landlord' bill.
It, therefore, remains to be seen whether the bill will be introduced in it's previously suggested format; including, most notably, an end to Section 21 evictions - or whether high-level influence will somewhat tone down it's potential impact on landlords.
According to research by the housing charity Shelter and Yougov, nearly 230,000 private renters have received a no-fault eviction notice in the three years since the Bill was first announced. However, NRLA felt that “.. responsible landlords need to have confidence that they can take back possession of their properties swiftly and effectively when they have good reason to when Section 21 ends.”
Today the Bank of England’s (BoE) Monetary Policy Committee (MPC) took the decision to raise the UK base rate to 4.5%. This is the 12th consecutive increase in the base rate since it began on its current path of ascension back in December 2021 - and the sharpest continuous rise in rates since 1989.
With inflation still above 10%, there seems to be a fairly unanimous view that this won’t be the last in this spate of base rate rises, with many financial analysts expecting the bank rate to hit 5% before the end of the year. The MPC will make their next decision on the BoE base rate on 22 June.
Fixed-rate mortgages are not so vulnerable to immediate change following base rate announcements as variable rates are. Trackers, for example, are immediately impacted and those on other variable rates are likely to feel the impact more quickly.
In recent weeks, we've actually seen some lenders lower their purchase rates on fixed-rate products, but it remains to be seen whether they will maintain these rates. If you're coming to the end of a deal, now might be a good time to look, especially as further base rate rises are expected.
People with a tracker rate mortgage, can, of course, expect an immediate 0.25% increase to their current interest rate. With 1.4 million mortgage holders set to pay £7000 more a year towards their mortgage as a result, now may be the time to consider other rate types. You can stay up to date with average mortgage interest rates in the UK here.
Skipton building society has introduced an industry-first mortgage product aimed at prospective homeowners trapped by the circumstances of 'generation rent'. The new product, which Skipton expects to see a high level of demand for, offers up to 100% loans to those able to demonstrate a substantial history of making rental payments.
Products details: 2-year fixed-rate deal at 5.49%
Must be a first-time buyer
Aged 21+ (maximum term 35 years)
Must be able to evidence affordability and credit reference checks
Must provide evidence of a minimum 12-months worth of consistent rental payments (loan repayments cannot be greater than the average of last six months’ rental costs)
While this will be welcome news to many trapped in a rent cycle, leaving them unable to save a mortgage deposit, there is expected to be some level of concern in the industry, given the role 100% mortgages played in the 2008 financial crash.
Although there are a small number of 100% mortgage products already on the market, these have only been available to applicants with a willing and able guarantor. Skipton's intention is to level the playing field for those without access to the 'bank of mum and dad'.
Adam Davitt, Mortgage Expert at Mojo Mortgages feels that the controversial product could be 'a game changer in the mortgage industry' and sees it as 'a clear demonstration of Skipton Building Society's commitment to helping first time buyers get on the property ladder.' He also summised that 'with Skipton being bold enough to take the first step, we could see more competition come to the market at 100% LTV providing additional support and choice for first time buyers struggling to get their step onto the ladder.'
According to research by The Mortgage Lender (TML), it would seem so. They found that 28% of applicants with non-typical (predominantly self-employed) income types have been rejected by at least one lender. A clear sign that non-PAYE applicants have a more difficult time getting a mortgage approved, despite many lenders being open to non-typical income types.
Of the 28% rejected applicants:
46% were self-employed contract workers on a zero-hour contract
29% were freelance self-employed applicants
10% were self-employed business owners
15% were undefined - other non-typical income types may include retirement income, benefit income, otherwise complex or non-UK derived income
While the reasons quoted for rejection were varied, for 18% of applicants it was due to either a lack of tax return, tax year overview or two to three years of accountant certified accounts. This aligns with the greatest disparity in lender criteria for employed versus self-employed applicants - the proof of income required.
Whereas three to six months worth of payslips is considered adequate proof of income for employed applicants by most lenders, self-employed applicants need an absolute minimum of 12 months worth of proof of income. However, two to three years is a typical requirement, with the type of proof required dependant on the type of self-employed activity and lender.
The good news is, the same TML research also showed that many of those rejected have not been discouraged from seeking out a mortgage with a different lender. Self-employed mortgage applicants can increase their chance of securing a successful mortgage offer by speaking to a mortgage broker, who can recommend lenders who are more flexible with complex income types.
In contrast to competitor TSB, a number of lenders have begun to raise their fixed-rate deals in preparation for the Bank of England (BoE) base rate announcement on 11 May. Whilst TSB recently announced cuts to their two and five year fixes for residential and buy-to-let purchase, HSBC, NatWest and Virgin have announced price increases across numerous products in their range:
HSBC: Implementing increases across all loan-to-value (LTV) ratios for new and existing residential customer deals
NatWest two-year fix (remortgage): up to 4.46%* at 60% LTV and 4.54%* at 75% LTV
NatWest five-year fix (purchase): up to 4.17%* at 60% LTV
NatWest five-year fix (remortgage): up to 4.20%* at 75% LTV
Virgin Five-year fix: up to 4.09%* at 65% LTV
Virgin five-year fix (buy-to-let): up to 4.52%* at 65% LTV
*Rates correct at the time of writing The BoE Monetary policy committee will make their next decision on the base rate on 11 May. Compare today's average mortgage interest rates for fixed and variable deals across the market courtesy of Mojo mortgages.
According to Rightmove, the average UK rent outside of London has risen to £1,190pcm, an increase of 9.4% in the previous 12 month. Whilst inside the capital, rents have hit a new record average of £2,501pcm, a 14% increase on the same period last year.
Despite this, high mortgage rates and house prices are keeping many prospective first-time-buyers in the rental market for the time being. Whilst there has been a slight narrowing in the gap between supply and demand, tenant demand remains at a near record high and greatly outweighs property availability.
To put this in perspective over the longer term, rental demand for the UK as a whole is 48% higher than it was in 2019. For those landlords looking to make further investments, terraced houses are in greatest demand, with availability at less than 1 property for every 4 tenants seeking one.
Meanwhile lenders are beginning to address the difficulties facing today's buy-to-let mortgage applicants. With TSB and HSBC recently reducing certain BTL fixed-rates and Accord increasing their LTV to 80% for BTL purchases, there's still hope for UK landlords looking to take advantage of the current high demand situation.
As the industry gears up for the next Bank of England (BoE) base rate announcement on 11 May, many property owners and prospective buyers are, understandably, wondering what will happen to mortgage rates as the BoE continues their mission to reduce inflation.
In a somewhat promising move, TSB has announced cuts of up to 0.25 percentage points to both their two and five-year fixed residential and buy-to-let purchase rates to:
TSB two-year fixed-rate residential: 4.49% at 85% LTV*
TSB five-year fixed-rate residential: 4.29% at 85% LTV*
TSB two-year fixed-rate buy-to-let: 4.59% at 60% LTV*
If you're looking for a self-build mortgage, Saffron building society has also cut their discounted variable rate self-build mortgage rates to 5.39%* from 5.59%. *Rates correct at time of writing
It remains to be seen whether other lenders will follow suit leading up to and following the BoE Monetary Committee's announcement next week. In the meantime you can compare the above with our average mortgage rates today.