UK banks finance green homes via BTL fintech

UK banks finance green homes via BTL fintech
Rod Lockhart, LendInvest’s chief executive officer

Barclays and HSBC have funnelled £150m into buy-to-let fintech lender Lendinvest to help landlords make property improvements, with a particular focus on bringing homes up to an energy performance certificate rating of C.

Whilst HSBC already funds Lendinvest’s short-term financing, this is the first time Barclays has come onboard. The fintech lender also receives long-term financing from JPMorgan, Citi, and National Australia Bank.

The firm also went public in July, unlocking £40m in primary capital.

“We’re open to any [property] enhancements, but a big portion of [the financing] will be environmental,” Rod Lockhart, Lendinvest’s chief executive officer, told FTAdviser.

“Our product provides [landlords] with an incentive to get to an EPC C or above.”

Lendinvest’s short-term loans last on average 12 months, though they can be longer or shorter depending on the BTL investor’s underlying project. The value of one of these loans falls anywhere between £100,000 and £2m.

“We’ve seen a real demand as investors come out of Covid uncertainty and become more active again,” said Lockhart.

“These borrowers are moving quickly to take advantage of the opportunities which come out of their acquisitions,” he continued. One such opportunity is the government’s EPC targets.

Since April 2020, all BTL properties have had to have an energy performance certificate rating of E. But the government wants to raise this requirement to an EPC rating of C from 2025.

This affects more than half (58 per cent) of the UK’s housing stock. Some in the industry have raised their concerns over lenders potentially not lending on properties with an EPC rating of D or below.

But Lockhart said he is seeing an increasing number of BTL investors keen to do their bit. “We’ve seen investors actually wanting to help the environment,” Lockhart explained.

“Hopefully over the next 12-24 months, more products will become available to upgrade buildings in this way.”

HSBC and Barclays’ £150m financing does come with a set of criteria regarding the types of properties or borrowers Lendinvest can lend to. But Lockhart said this was “nothing unusual”.

By lending through a fintech, these banks can take advantage of its specialist technology.

The chief executive cited open banking which it uses to approve income, as well as phone-friendly customer identity checks, and integrated tools such as DocuSign.

“We’re always looking to bring new investors onto our platform in different ways,” said Lockhart.

“This particular partnership is fairly well set for the next year. But as we use the capital, we will look at the same banks or other investors [for more financing].”

The focus on environmental home upgrades is a big one for BTL investors. Last month, data released by the Office of National Statistics suggested the government’s green homes initiative could cost landlords a collective £21.5bn. This works out to £7,646 per privately rented property.

But the £2bn Green Homes Grant the government introduced to fund its scheme was scrapped in March, leaving no clear path for landlords without the cash in hand to make the desired improvements.